Question

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	$357,800		$221,800		$184,100
Cost of goods sold	186,100		108,700		123,300
Gross profit	$171,700		$113,100		$60,800
Selling and administrative expenses	147,700		81,400		101,500
Income (loss) from operations	$24,000		$31,700		$(40,700)

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	$57,200		$28,800		$25,800
Selling and administrative expenses	42,900		26,600		25,800

These fixed costs are used to support all three product lines. In addition, you have determined that the inventory is negligible.

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 $40,700.

b. Prepare a variable costing income statement for the three products. Enter a net loss as a negative number using a minus sign; enter all other amounts as positive numbers.

Winslow Inc.
Variable Costing Income Statements—Three Product Lines
For the Year Ended December 31, 20Y1
	Cross Training Shoes	Golf Shoes	Running Shoes
Revenues	$	$	$
Variable cost of goods sold
Manufacturing margin	$	$	$
Variable selling and administrative expenses
Contribution margin	$	$	$

Answer 1

• All working forms part of the answer
• Answer is given for Part ‘B’ as asked only.
• Note: Variable cost of Goods and variable Selling & Administrative expenses are calculated by reducing fixed amounts (given in second table of question) from the total amounts (given in first table of question).
• Answer as asked

Winslow Inc.
Variable Costing Income Statements—Three Product Lines
For the Year Ended December 31, 20Y1
	Cross Training Shoes	Golf Shoes	Running Shoes
Revenues	$357800	$221800	$184100
(-) Variable cost of goods sold	$128900	$79900	$97500
Manufacturing margin	$228900	$141900	$86600
(-) Variable selling and administrative expenses	$104800	$54800	$75700
Contribution margin	$124,100	$87,100	$10,900