Below is a variable costing income statement for Wilner Glass Company, a maker o

Question

Below is a variable costing income statement for Wilner Glass Company, a maker of bottles for the beverage industry. For the coming year, the company is considering hiring 3 additional sales representatives at $79,600 each for base salary plus 5 percent of their sales for commissions. The company anticipates that each sales representative will generate $889,800 of incremental sales. Wilner Glass Company Income Statement For the Year Ending December 31, 2014

Sales $20,030,000

Less: Variable cost of goods sold $7,611,400

Variable selling expense 4,206,300

Contribution margin 8,212,300

Less: Fixed production expense 2,594,300

Fixed selling expense 1,785,400

Fixed administrative expense 2,971,600

Net income $861,000

Calculate the impact on profit of the proposed hiring decision.

Explanation / Answer

Comparison of profits

Particulars Amount

Sales 22699,400

Less:   

Variable cost of goods sold (4766,874)

Variable selling expense (4339,770)

Contribution margin 13592,756

Less:

Fixed production expenses 2594,300

Fixed selling expenses (1785,400)

Fixed administrative expenses (3210,400)

Net income 6002,656

The net income increases by $5141,656 when the sales representatives are hired.

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