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 Cross Training Shoes Golf Shoes Running Shoes $556,200 (289,200) $267,000 (229,600) $37,400 In addition, you have determined the following information with respect to allocated fixed costs: Cross Training Shoes Golf Shoes Running Shoes Revenues Cost of goods sold Gross profit Selling and administrative expenses Operating income Fixed costs: Cost of goods sold Selling and administrative expenses $89,000 66,700 $339,300 $285,000 (166,300) (191,000) $44,100 40,700 $39,900 39,900 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. $173,000 $94,000 (124,600) (157,000) $48,400 $(63,000) 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 $63,000. 1 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 Revenues V Variable cost of goods sold Variable selling expenses Contribution margin Manufacturing margin Fixed costs: X Total fixed costs Operating income (loss) X ✓ X Fixed manufacturing costs Fixed selling and administrative expenses ✓ ✓ $ Cross Training Shoes 556,200 ✔ 200,200 ✔ 162,900 X $ 193,100 X 193,100 ✔ 89,000 ✓ 66,700 ✔ 320,300 X X $ -127,200 X $ Golf Shoes 339,300 ✓ 122,200 ✓ 83,900 X 133,200 X 133,200 ✓ s $ 44,100 40,700 ✔ 320,300 X -187,100 X $ Running Shoes 285,000 151,100 117,100 X 16,800 X 16,800 39,900 39,900 ✔ 320,300 X -303,500 X