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 $346,300 $204,300 $169,600 Cost of goods sold (180,100) (100,100) (113,600) Gross profit $166,200 $104,200 $56,000 Selling and administrative expenses (142,900) (75,000) (93,500) Operating income $23,300 $29,200 $(37,500) In addition, you have determined the following information with respect to allocated fixed costs: Cross Golf Running Training Shoes Shoes Shoes Fixed costs: Cost of goods sold $55,400 $26,600 $23,700 Selling and administrative expenses 41,600 24,500 23,700 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 resul of eliminating the running shoe line, management expects the profits of the company to increase by $37,500.
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 $346,300 $204,300 $169,600 Cost of goods sold (180,100) (100,100) (113,600) Gross profit $166,200 $104,200 $56,000 Selling and administrative expenses (142,900) (75,000) (93,500) Operating income $23,300 $29,200 $(37,500) In addition, you have determined the following information with respect to allocated fixed costs: Cross Golf Running Training Shoes Shoes Shoes Fixed costs: Cost of goods sold $55,400 $26,600 $23,700 Selling and administrative expenses 41,600 24,500 23,700 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 resul of eliminating the running shoe line, management expects the profits of the company to increase by $37,500.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Please answer the following. Show work.
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
$346,300
$204,300
$169,600
Cost of goods sold
(180,100)
(100,100)
(113,600)
Gross profit
$166,200
$104,200
$56,000
Selling and administrative expenses
(142,900)
(75,000)
(93,500)
Operating income
$23,300
$29,200
$(37,500)
In addition, you have determined the following information with respect to allocated fixed costs:
Cross
Golf
Running
Training
Shoes
Shoes
Shoes
Fixed costs:
Cost of goods sold
$55,400
$26,600
$23,700
Selling and administrative expenses
41,600
24,500
23,700
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 $37,500.
Transcribed Image Text:b. Prepare a variable costing income statement for the three products. Enter a net loss as a negative number using a minus sign.
Winslow Inc.
Variable Costing Income Statements-Three Product Lines
For the Year Ended December 31, 20Y1
Cross Training Shoes
Golf Shoes
Running Shoes
Revenues
$4
Variable cost of goods sold
Manufacturing margin
$
$4
Variable selling and administrative expenses
Contribution margin
Fixed costs:
Fixed manufacturing costs
Fixed selling and administrative expenses
Total fixed costs
$4
Operating income (loss)
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 company would actually
by $
Management should keep the line and attempt to improve the profitability of the product by
prices,
volume, or
costs.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 1 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education