Fleet-of-Foot Inc. manufactures and sells three types of shoes. The income statements prepared under the absorption costing method for the three shoes are as follows: Line Item Description Cross Training Shoes Golf Shoes Running Shoes Revenues $362,100 $206,400 $171,300 Cost of goods sold (188,300) (101,100) (114,800) Gross profit $173,800 $105,300 $56,500 Selling and administrative expenses (149,500) (75,800) (94,400) Operating income $24,300 $29,500 $(37,900) In addition, you have determined the following information with respect to allocated fixed costs: Line Item Description Cross Training Shoes Golf Shoes Running Shoes Fixed costs: Cost of goods sold $57,900 $26,800 $24,000 Selling and administrative expenses 43,500 24,800 24,000 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 $37,900. b. Prepare a variable costing income statement for the three products. Enter a net loss as a negative number using a minus sign.??

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Fleet-of-Foot Inc. manufactures and sells three types of shoes. The income statements prepared under the absorption costing method for the three shoes are as follows:

Line Item Description	Cross Training Shoes	Golf Shoes	Running Shoes
Revenues	$362,100	$206,400	$171,300
Cost of goods sold	(188,300)	(101,100)	(114,800)
Gross profit	$173,800	$105,300	$56,500
Selling and administrative expenses	(149,500)	(75,800)	(94,400)
Operating income	$24,300	$29,500	$(37,900)

In addition, you have determined the following information with respect to allocated fixed costs:

Line Item Description	Cross Training Shoes	Golf Shoes	Running Shoes
Fixed costs:
Cost of goods sold	$57,900	$26,800	$24,000
Selling and administrative expenses	43,500	24,800	24,000

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 $37,900. b. Prepare a variable costing income statement for the three products. Enter a net loss as a negative number using a minus sign.??

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