PROBLEM 5-10. Using Information from a Variable Costing Income Statement to Make a Decision [LO 2,5] Below is a variable costing income statement for Trio Office Supplies, a com- pany well known for its quality high-volume automatic staplers. For the coming year, the company is considering hiring three additional sales representatives at $75,000 each for base salary plus 5 percent of their sales for commissions. The company anticipates that each sales representative will generate $400,000 of incremental sales. $30,000,000 Trio Office Supplies Income Statement For the Year Ending December 31, 2011 Sales Less: Variable cost of goods sold $15,750,000 Variable selling expense 3,000,000 Contribution margin Less: Fixed production expense 2,000,000 Fixed selling expense 1,500,000 Fixed administrative expense 3,000,000 Net income 18,750,000 11,250,000 6,500,000 $ 4,750,000 Required a. Calculate the impact on profit of the proposed hiring decision. Should the company hire the two 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? $1,200,000 Analysis by Chief Accountant Incremental sales Income per dollar of sales in 2011: ($4,750,000 = $30,000,000) Net increase in income from sales Less increase in base salary Effect on profit .158 189,600 225,000 35,400) ($