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I keep putting that number inside the box and it keeps saying that its wrong 1,386,000

I keep putting that number inside the box and it keeps saying that its wrong 1,386,000

FINANCIAL ACCOUNTING
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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I keep putting that number inside the box and it keeps saying that its wrong 1,386,000

**Winslow Inc. Variable Costing Income Statements—Three Product Lines For the Year Ended December 31, 20Y1** ### Product Lines: Cross Training Shoes, Golf Shoes, Running Shoes **Revenues:** - Cross Training Shoes: $5,800,000 - Golf Shoes: $6,900,000 - Running Shoes: $4,200,000 **Variable Cost of Goods Sold:** - Cross Training Shoes: $2,088,000 - Golf Shoes: $2,484,000 - Running Shoes: $2,016,000 **Manufacturing Margin:** - Cross Training Shoes: $3,712,000 - Golf Shoes: $4,416,000 - Running Shoes: $2,184,000 **Variable Selling and Administrative Expenses:** - Cross Training Shoes: $1,740,000 - Golf Shoes: $1,656,000 - Running Shoes: $1,554,000 **Contribution Margin:** - Cross Training Shoes: $1,972,000 - Golf Shoes: $2,760,000 - Running Shoes: $630,000 **Fixed Costs:** - **Fixed Manufacturing Costs:** - Cross Training Shoes: $928,000 - Golf Shoes: $897,000 - Running Shoes: $798,000 - **Fixed Selling and Administrative Expenses:** - Cross Training Shoes: $696,000 - Golf Shoes: $828,000 - Running Shoes: $588,000 **Total Fixed Costs:** - Cross Training Shoes: $1,624,000 - Golf Shoes: $1,725,000 - Running Shoes: $1,386,000 **Operating Income (Loss):** - Cross Training Shoes: $348,000 - Golf Shoes: $1,035,000 - Running Shoes: $(756,000) ### Analysis for Eliminating Running Shoe Line If the running shoe line were eliminated: - The contribution margin would be eliminated. - Fixed costs would not be eliminated. Therefore, the company’s profit would decline by $1,386,000. ### Recommendations: Management should consider strategies to improve profitability such as: - Increasing prices - Increasing volume - Reducing costs
Transcribed Image Text:**Winslow Inc. Variable Costing Income Statements—Three Product Lines For the Year Ended December 31, 20Y1** ### Product Lines: Cross Training Shoes, Golf Shoes, Running Shoes **Revenues:** - Cross Training Shoes: $5,800,000 - Golf Shoes: $6,900,000 - Running Shoes: $4,200,000 **Variable Cost of Goods Sold:** - Cross Training Shoes: $2,088,000 - Golf Shoes: $2,484,000 - Running Shoes: $2,016,000 **Manufacturing Margin:** - Cross Training Shoes: $3,712,000 - Golf Shoes: $4,416,000 - Running Shoes: $2,184,000 **Variable Selling and Administrative Expenses:** - Cross Training Shoes: $1,740,000 - Golf Shoes: $1,656,000 - Running Shoes: $1,554,000 **Contribution Margin:** - Cross Training Shoes: $1,972,000 - Golf Shoes: $2,760,000 - Running Shoes: $630,000 **Fixed Costs:** - **Fixed Manufacturing Costs:** - Cross Training Shoes: $928,000 - Golf Shoes: $897,000 - Running Shoes: $798,000 - **Fixed Selling and Administrative Expenses:** - Cross Training Shoes: $696,000 - Golf Shoes: $828,000 - Running Shoes: $588,000 **Total Fixed Costs:** - Cross Training Shoes: $1,624,000 - Golf Shoes: $1,725,000 - Running Shoes: $1,386,000 **Operating Income (Loss):** - Cross Training Shoes: $348,000 - Golf Shoes: $1,035,000 - Running Shoes: $(756,000) ### Analysis for Eliminating Running Shoe Line If the running shoe line were eliminated: - The contribution margin would be eliminated. - Fixed costs would not be eliminated. Therefore, the company’s profit would decline by $1,386,000. ### Recommendations: Management should consider strategies to improve profitability such as: - Increasing prices - Increasing volume - Reducing costs
**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** | $5,800,000 | $6,900,000 | $4,200,000 | | **Cost of goods sold** | (3,016,000) | (3,381,000)| (2,814,000) | | **Gross profit** | $2,784,000 | $3,519,000 | $1,386,000 | | **Selling and administrative expenses** | (2,436,000) | (2,484,000)| (2,142,000) | | **Operating income** | $348,000 | $1,035,000 | $(756,000) | In addition, the following information with respect to allocated fixed costs was determined: | | Cross Training Shoes | Golf Shoes | Running Shoes | |--------------------------------|----------------------|------------|---------------| | **Fixed costs:** | | | | | Cost of goods sold | $928,000 | $897,000 | $798,000 | | Selling and administrative expenses | $696,000 | $828,000 | $588,000 | These fixed costs are used to support all three product lines and will not change with the elimination of any one product. In addition, it has been 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 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 $756,000. **a. Are management’s decisions and conclusions correct?** Management’s decision and conclusion are **incorrect**. The profit will **not** be improved because the fixed costs used in manufacturing
Transcribed Image Text:**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** | $5,800,000 | $6,900,000 | $4,200,000 | | **Cost of goods sold** | (3,016,000) | (3,381,000)| (2,814,000) | | **Gross profit** | $2,784,000 | $3,519,000 | $1,386,000 | | **Selling and administrative expenses** | (2,436,000) | (2,484,000)| (2,142,000) | | **Operating income** | $348,000 | $1,035,000 | $(756,000) | In addition, the following information with respect to allocated fixed costs was determined: | | Cross Training Shoes | Golf Shoes | Running Shoes | |--------------------------------|----------------------|------------|---------------| | **Fixed costs:** | | | | | Cost of goods sold | $928,000 | $897,000 | $798,000 | | Selling and administrative expenses | $696,000 | $828,000 | $588,000 | These fixed costs are used to support all three product lines and will not change with the elimination of any one product. In addition, it has been 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 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 $756,000. **a. Are management’s decisions and conclusions correct?** Management’s decision and conclusion are **incorrect**. The profit will **not** be improved because the fixed costs used in manufacturing
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