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 $79,300 each for base salary plus 5 percent of their sales for commissions. The company anticipates that each sales representative will generate $890,300 of incremental sales.

1.Calculate the impact on profit of the proposed hiring decision. Profit increase by _________?

sales 19,970,00 Less: Variable COGS 7,788,300 Variable Selling expense 3,994,00 11,782,300 Contritbution Margin 8,187,700 Less fixed production exoense 2,512,300 Fixed selling exense 1782500 fixed administrative epense 2986600 7281400 net income 906300

Explanation / Answer

1.calculation of contribution margin ratio=contribution margin/Sales

=8187700/19970000

=41%

Increase in sales=19970000+(890000*3)

=22640000

Increase in Sales representative cost=79300*3=237900

Increase in sales commission=(890000*3)*5%

=2670000*5%=133500

Now, selling expense=1782500+133500+237900=2153900

Income statement:

Increase in net income=1629600-906300=$723,300

Sales 22640000 Contribution margin ratio 41% Contribution margin 9282400 Less: Fixed production expense 2512300 Fixed selling expense 2153900 Fixed administration expense 2986600 7652800 Net income 1629600

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.