Answer:
Winslow Inc.
a. No. I do not agree with management's decision and conclusions.  Eliminating the running shoes line increased the company-wide loss to $112,600 from a profit of $7,900.
b. Variable Costing Income Statements:
1                                   Cross Training  Golf Shoes  Running Shoes  Total
2 Revenues                      $850,000     $700,000    $635,000  $2,185,000
3 Variable costs:
Cost of goods sold             284,500       248,400      298,500       831,400
Selling and administrative  293,100        175,500       216,000      684,600                      
Total                                    577,600       423,900       514,500    1,516,000
4 Gross profit                   $272,400     $276,100     $120,500   $669,000
5 Fixed costs:
Cost of goods sold             128,500         90,300       120,500      339,300
Selling & administrative      95,900          82,400       143,500       321,800
Total                                   224,400        172,700      264,000        661,100
6 Income (Loss) from       $48,000      $103,400    $(143,500)       $7,900
c. Eliminating the line only eliminated the variable costs of goods sold and selling and administrative expenses.  The fixed costs were not changed with the elimination.  Therefore, eliminating the running shoes line increased the company-wide loss to $112,600 from a profit of $7,900.
Explanation:
a) Data and Calculations:
Winslow Inc.
Product Income Statements—Absorption Costing
For the Year Ended December 31, 20Y1
1                                   Cross Training  Golf Shoes  Running Shoes  Total
2 Revenues                      $850,000     $700,000      $635,000
3 Cost of goods sold           413,000       338,700         419,000
4 Gross profit                    $437,000     $361,300       $216,000
5 Selling & administrative
  expenses                         389,000       257,900         359,500
6 Income (Loss) from        $48,000      $103,400      $(143,500)
1                                   Cross Training  Golf Shoes  Running Shoes  Total
2 Revenues                      $850,000     $700,000    $635,000  $2,185,000
3 Variable costs:
Cost of goods sold             284,500       248,400      298,500       831,400
Selling and administrative  293,100        175,500       216,000      684,600                      
Total                                    577,600       423,900       514,500    1,516,000
4 Gross profit                   $272,400     $276,100     $120,500   $669,000
5 Fixed costs:
Cost of goods sold             128,500         90,300       120,500      339,300
Selling & administrative      95,900          82,400       143,500       321,800
Total                                   224,400        172,700      264,000        661,100
6 Income (Loss) from       $48,000      $103,400    $(143,500)       $7,900
Eliminating the running shoe line:
1                                   Cross Training  Golf Shoes          Total
2 Revenues                      $850,000     $700,000      $1,550,000
3 Cost of goods sold:
Variable costs                     284,500       248,400          532,900
Fixed costs                          128,500         90,300           339,300
Total                                     413,000       338,700           872,200
4 Gross profit                   $437,000      $361,300        $677,800
5 Selling & administrative  expenses:
Variable costs                    293,100         175,500         468,600
Fixed costs                          95,900          82,400          321,800
Total                                  389,000        257,900         790,400
6 Income (Loss) from       $48,000      $103,400       ($112,600)