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? v2.cengagenow.com/ilrn/takeAssignment takeAssignmentMando?invoker=assignments&takeAssignmentSessionLocator;=assignment take&inprogress-false; Chapter 20 Assignment Book Calculator Variable and Absorption Costing-Three Products Winslow Inc. manufactures and sells three types of shoes. The income statements prepared under the absorption costing method for the three shoes are as follows: Winslow Inc. Product Income Statements-Absorption Costing For the Year Ended December 31, 20Y1 Cross Training Shoes Golf Shoes $246,400 120,700 $125,700 90,500 $35,200 Running Shoes $211,900 142,000 $69,900 116,700 $(46,800) In addition, you have determined the following information with respect to allocated fixed costs: Revenues Cost of goods sold Gross profit Selling and administrative expenses $432,200 224,700 $207,500 178,500 $29,000 Income (loss) from operations Cross Training Shoes Golf Running Shoes Shoes Fixed costs: Cost of goods sold $69,200 $32,000 $29,700 51,900 29,600 29,700 Selling and administrative expenses These fixed costs are used to support all three product lines. In addition, you have determined that the inventory is negligible The management of the company has deemed the profit performance of the running shoe line as unacceptable. As a result, it has decided to eliminate the running shoe line. Management does not expect to be able to increase sales in the other two lines. However, as a result of eliminating the running shoe line, management expects the profits of the company to increase by $46,800 Check My Work Previous Next Assignment Score: 0.0% Email Instructor Save and Exit Submit Assignment for Grading

Explanation / Answer

Answer a. Management's decision and conclusion are incorrect. The profit would not be improved because the fixed costs used in manufacturing and selling running shoes would not be avoided if the line is eliminated. Answer b. Winslow Inc. Variable Costing Income Statements - Three Product Lines For the Year Ended Dec 31, 20Y1 Cross Training Shoes Golf Shoes Running Shoes Revenues    432,200.00    246,400.00    211,900.00 Variable Cost of Goods Sold    155,500.00      88,700.00    112,300.00 Manufacturing Margin    276,700.00    157,700.00      99,600.00 Variable Selling & Administrative Expense    126,600.00      60,900.00      87,000.00 Contribution Margin    150,100.00      96,800.00      12,600.00 Fixed Costs: Fixed Manufacturing Costs      69,200.00      32,000.00      29,700.00 Fixed Selling & Administrative Expenses      51,900.00      29,600.00      29,700.00 Income From Operations      29,000.00      35,200.00    (46,800.00) Answer c. If the running shoe line were eliminated, then the contribution margin of the product line would also be eliminated and the fixed costs would not be eliminated. Thus, the profit of the company wouldactually decline by $12,600. Management should keep the line and attempt to improve the profitability of the product by increasing prices, increasing volume, or reducing costs.

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