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 $428,100 $252,600 $219,800 Cost of goods sold (222,600) (123,800) (147,300) Gross profit $205,500 $128,800 $72,500 Selling and administrative expenses (176,700) (92,700) (121,100) Operating income $28,800 $36,100 $(48,600) 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 $68,500 $32,800 $30,800 Selling and administrative expenses 51,400 30,300 30,800 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 $48,600.
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 $428,100 $252,600 $219,800 Cost of goods sold (222,600) (123,800) (147,300) Gross profit $205,500 $128,800 $72,500 Selling and administrative expenses (176,700) (92,700) (121,100) Operating income $28,800 $36,100 $(48,600) 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 $68,500 $32,800 $30,800 Selling and administrative expenses 51,400 30,300 30,800 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 $48,600.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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
$428,100
$252,600
$219,800
Cost of goods sold
(222,600)
(123,800)
(147,300)
Gross profit
$205,500
$128,800
$72,500
Selling and administrative expenses
(176,700)
(92,700)
(121,100)
Operating income
$28,800
$36,100
$(48,600)
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
$68,500
$32,800
$30,800
Selling and administrative expenses
51,400
30,300
30,800
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 $48,600.
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