Below is a variable costing income statement for Trio Office Supplies, a company well known for its
Question:
Required
a. Calculate the impact on profit of the proposed hiring decision. Should the company hire the three additional sales representatives?
b. Consider the analysis of the decision performed by the company's chief accountant and compare it to your analysis in part a. What is the fundamental flaw in the chief accountant's work?
Analysis by Chief Accountant
Incremental sales............................................... $1,200,000
Income per dollar of sales in 2014:
($5,500,000 ÷ $30,000,000) .................................. .183
Net increase in income from sales............................ 219,600
Less increase in base salary.................................... 225,000
Effect on profit................................................... ($ 5,400)
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