b. Prepare a variable costing income statement for the three products. Enter a net loss as a negative number using a minus sign. Winslow Inc.Variable Costing Income Statements—Three Product LinesFor the Year Ended December 31, 20Y1
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 | $402,500 | $253,600 | $218,100 | |||
| Cost of goods sold | (209,300) | (124,300) | (146,100) | |||
| Gross profit | $193,200 | $129,300 | $72,000 | |||
| Selling and administrative expenses | (166,200) | (93,100) | (120,200) | |||
| Operating income | $27,000 | $36,200 | $(48,200) |
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 | $64,400 | $33,000 | $30,500 | |||
| Selling and administrative expenses | 48,300 | 30,400 | 30,500 |
These fixed costs are used to support all three product lines and will not change with the elimination of any one product. In addition, you have determined that the effects of inventory may be ignored.
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 $48,200.
Question Content Area
b. Prepare a variable costing income statement for the three products. Enter a net loss as a negative number using a minus sign.
| Cross Training Shoes | Golf Shoes | Running Shoes | |
|
|
$Revenues | $Revenues | $Revenues |
|
|
Variable cost of goods sold | Variable cost of goods sold | Variable cost of goods sold |
|
|
$Manufacturing margin | $Manufacturing margin | $Manufacturing margin |
|
|
Variable selling and administrative expenses | Variable selling and administrative expenses | Variable selling and administrative expenses |
|
|
$Contribution margin | $Contribution margin | $Contribution margin |
| Fixed costs: | |||
|
|
$Fixed manufacturing costs | $Fixed manufacturing costs | $Fixed manufacturing costs |
|
|
Fixed selling and administrative expenses | Fixed selling and administrative expenses | Fixed selling and administrative expenses |
| Total fixed costs | $fill in the blank bd9645fc102c05c_29 | $fill in the blank bd9645fc102c05c_30 | $fill in the blank bd9645fc102c05c_31 |
| Operating income (loss) | $fill in the blank bd9645fc102c05c_32 | $fill in the blank bd9645fc102c05c_33 | $fill in the blank bd9645fc102c05c_34 |
Absorption Costing
Absorption Costing is used to allocate fixed cost of product. It allocates fixed overhead costs across all units produced for the period. It results in a higher net income as compared with variable costing.
Step by step
Solved in 4 steps
