Question

Variable and Absorption Coming Three Products Winslow Inc, manufactures and sell 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, 2011 Cross Training Shoes Gold Shoes Running Shoes 55,300,000 $6,900,000 $4,200,000 Cost of goods sold (3,016,000) (3,381,000) 2,814,000) Coro $2,784,000 $3,519,000 $1,386,000 Seling and distrative expenses (2.4036,000) (2,484.000) (2,142.000) Operating income Ination, you have determined the information with reset to do Cross Golf Running Training $ Cost of goods sold Sehing and administrave expenses $928,000 66,000 7.000 8 000 $798,000 000 These fixed costs are used to support three product lines and will not change with the climation 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 go performance of the running shoe l as naceptable. As a result, it has decided to iminate the running shoebe Management does not expect to be able to increase in the other two lines. However, as a result of luminating the running show, management expects the profits of the company to increase by $750,000

Answer 1

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Winslow Inc.
Calculation of Variable costs
	Cross	Golf	Running
Total cost of good sold	3,016,000.00	3,381,000.00	2,814,000.00
Fixed cost of good sold	928,000.00	897,000.00	798,000.00
Variable cost of good sold	2,088,000.00	2,484,000.00	2,016,000.00
	Cross	Golf	Running
Total Selling & admin cost	2,436,000.00	2,484,000.00	2,142,000.00
Fixed Selling & admin cost	696,000.00	828,000.00	588,000.00
Variable Selling & admin cost	1,740,000.00	1,656,000.00	1,554,000.00
Variable costing income statement:
	Cross	Golf	Running
Revenues	5,800,000.00	6,900,000.00	4,200,000.00
Less: Variable cost of good sold	2,088,000.00	2,484,000.00	2,016,000.00
	3,712,000.00	4,416,000.00	2,184,000.00
Less: Variable Selling & admin cost	1,740,000.00	1,656,000.00	1,554,000.00
Contribution	1,972,000.00	2,760,000.00	630,000.00
Less: Fixed cost
Cost of good sold	928,000.00	897,000.00	798,000.00
Selling & admin cost	696,000.00	828,000.00	588,000.00
Total Fixed costs	1,624,000.00	1,725,000.00	1,386,000.00
Operating income (loss)	348,000.00	1,035,000.00	(756,000.00)
Fill in the blanks
Profit of company would actually Decrease
by $630000	i.e. contribution of Running shoes
Increasing the prices
Increasing the volume
Decreasing the costs.