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 Revenues $510,100 Cost of goods sold (265,300) Gross profit $244,800 Selling and administrative expenses (210,500) Operating income $34,300 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 $81,600 $39,800 $36,000 Selling and administrative expenses 61,200 36,700 36,000 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. a. Are management's decision and conclusions correct? Management's decision and conclusion are 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 $56,800. The profit improved because the fixed costs used in manufacturing and selling running shoes be avoided if the line is eliminated. Fleet-of-Foot Inc. Variable Costing Income Statements-Three Product b. Prepare a variable costing income statement for the three products. Enter a net loss as a negative number using a minus sign. Lines For the Year Ended December 31 Line Item Description Fixed costs: Total fixed costs Operating income (loss) Cross Training Shoes $306,100 (150,000) $156,100 (112,400) $43,700 Golf Running Shoes Shoes $ $257,100 (172,300) $84,800 (141,600) $(56,800) company would actually by $ attempt to improve the profitability of the product by volume, or costs. 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 and the fixed costs be eliminated. Thus, the profit of the . Management should keep the line and prices, be