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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 $51,400. a. Are management's decision and conclusions correct? Management's decision and conclusion are selling running shoes . The profit be avoided if the line is eliminated. b. Prepare a variable costing income statement for the three products. Enter a net loss as a negative number using a minus sign. Fleet-of-Foot Inc. Variable Costing Income Statements-Three Product Lines For the Year Ended December 31 Line Item Description Cross Training Shoes be improved because the fixed costs used in manufacturing and Golf Running Shoes Shoes

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 $51,400. a. Are management's decision and conclusions correct? Management's decision and conclusion are selling running shoes . The profit be avoided if the line is eliminated. b. Prepare a variable costing income statement for the three products. Enter a net loss as a negative number using a minus sign. Fleet-of-Foot Inc. Variable Costing Income Statements-Three Product Lines For the Year Ended December 31 Line Item Description Cross Training Shoes be improved because the fixed costs used in manufacturing and Golf Running Shoes Shoes

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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Variable and Absorption Costing-Three Products 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: Fleet-of-Foot Inc. Product Income Statements-Absorption Costing For the Year Ended December 31 Revenues Cost of goods sold Gross profit Selling and administrative expenses Operating income Fixed costs: Cross Training Shoes Golf Shoes Running Shoes $466,900 (242,800) $224,100 (192,700) $31,400 $280,100 (137,200) $142,900 (102,900) $40,000 In addition, you have determined the following information with respect to allocated fixed costs: Cross Training Shoes Golf Shoes Running Shoes $74,700 56,000 $232,500 (155,800) $76,700 (128,100) $(51,400) Cost of goods sold Selling and administrative expenses 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. $36,400 33,600 $32,600 32,600
Transcribed Image Text:Variable and Absorption Costing-Three Products 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: Fleet-of-Foot Inc. Product Income Statements-Absorption Costing For the Year Ended December 31 Revenues Cost of goods sold Gross profit Selling and administrative expenses Operating income Fixed costs: Cross Training Shoes Golf Shoes Running Shoes $466,900 (242,800) $224,100 (192,700) $31,400 $280,100 (137,200) $142,900 (102,900) $40,000 In addition, you have determined the following information with respect to allocated fixed costs: Cross Training Shoes Golf Shoes Running Shoes $74,700 56,000 $232,500 (155,800) $76,700 (128,100) $(51,400) Cost of goods sold Selling and administrative expenses 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. $36,400 33,600 $32,600 32,600
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 $51,400. ) a. Are management's decision and conclusions correct? Management's decision and conclusion are selling running shoes b. Prepare a variable costing income statement for the three products. Enter a net loss as a negative number using a minus sign. Fleet-of-Foot Inc. Variable Costing Income Statements-Three Product Lines For the Year Ended December 31 Line Item Description Show Transcribed Text Fixed costs: Total fixed costs Cross Training Shoes Operating income (loss) . The profit be avoided if the line is eliminated. Golf Running Shoes Shoes $ gooo Ĵ be improved because the fixed costs used in manufacturing and c. Use the report in (b) to determine the profit impact of eliminating the running shoe line, assuming no other changes. If the running shoes line were eliminated, then the contribution margin of the product line would be eliminated. Thus, the profit of the company would actually by $ ofitab of the product prices, volume, or and the fixed costs Management should keep the line and attempt to improve
Transcribed Image Text: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 $51,400. ) a. Are management's decision and conclusions correct? Management's decision and conclusion are selling running shoes b. Prepare a variable costing income statement for the three products. Enter a net loss as a negative number using a minus sign. Fleet-of-Foot Inc. Variable Costing Income Statements-Three Product Lines For the Year Ended December 31 Line Item Description Show Transcribed Text Fixed costs: Total fixed costs Cross Training Shoes Operating income (loss) . The profit be avoided if the line is eliminated. Golf Running Shoes Shoes $ gooo Ĵ be improved because the fixed costs used in manufacturing and c. Use the report in (b) to determine the profit impact of eliminating the running shoe line, assuming no other changes. If the running shoes line were eliminated, then the contribution margin of the product line would be eliminated. Thus, the profit of the company would actually by $ ofitab of the product prices, volume, or and the fixed costs Management should keep the line and attempt to improve
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