Problem 5-9

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 $82,000 each for base salary plus 5 percent of their sales for commissions. The company anticipates that each sales representative will generate $897,600 of incremental sales.

Wilner Glass Company

Income Statement

For the Year Ending December 31, 2014

Sales

$19,810,000

Less:

Variable cost of goods sold

$7,924,000

Variable selling expense

3,962,000 11,886,000

Contribution margin

7,924,000

Less:

Fixed production expense

2,559,100

Fixed selling expense

1,785,100

Fixed administrative expense

2,997,100 7,341,300

Net income

$582,700

Calculate the impact on profit of the proposed hiring decision.

Profit by $.

Should the company hire the two additional sales representatives?

Company hire the two additional sales representatives.