Variable and Absorption Costing—Three Products Winslow Inc. manufactures and sel

Question

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   Running Shoes
Revenues   $420,100      $239,500      $198,800     
Cost of goods sold   218,500      117,400      133,200     
Gross profit   $201,600      $122,100      $65,600     
Selling and administrative expenses   173,400      87,900      109,600     
Income (loss) from operations   $28,200      $34,200      $(44,000)     
In addition, you have determined the following information with respect to allocated fixed costs:
    Cross Training Shoes   Golf Shoes   Running Shoes
Fixed costs:           
Cost of goods sold   $67,200      $31,100      $27,800     
Selling and administrative expenses   50,400      28,700      27,800     
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 $44,000.
b. Prepare a variable costing income statement for the three products. Enter a net loss as a negative number using a minus sign; enter all other amounts as positive numbers.
Winslow Inc.
Variable Costing Income Statements—Three Product Lines
For the Year Ended December 31, 20Y1
Cross Training Shoes   Golf Shoes   Running Shoes
Revenues
$   $   $
Variable cost of goods sold
      
Manufacturing margin
$   $   $
Variable selling and administrative expenses
      
Contribution margin
$   $   $
Fixed costs:          
Fixed manufacturing costs
$   $   $
Fixed selling and administrative expenses
      
Total fixed costs   $   $   $
Income from operations   $   $   $

Explanation / Answer

VARIABLE COSTING INCOME STATEMENT CROSS TRAINING SHOES GOLF SHOES RUNNING SHOES Sales revenue 420100 239500 198800 Less: Variable cost of goods sold 151300 86300 105400 (Total COGS- FIXED COGS) (218500-67200) (117400-31100) (133200-27800) Manufacturing margin 268800 153200 93400 Less: Variable Selling and Admin Expense 123000 59200 81800 (Total Expense- Fixed expense) (173400-50400) (87900-28700) (109600-27800) Contribution Margin 145800 94000 11600 Fixed cost: Fixed Manufacturing cost 67200 31100 27800 Fixed Selling and Admin Expense 50400 28700 27800 Total Fixed cost 117600 59800 55600 Income From Operations 28200 34200 -44000

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