Below is a variable costing income statement for Trio Office Supplies, a company well known for its quality high-volume automatic staplers. For the coming year, the company is considering hiring three additional sales representatives at \(\$ 65,000\) each for base salary plus 4 percent of their sales for commissions. The company anticipates that each sales representative will generate \(\$ 350,000\) of incremental sales.

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?

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Sales Trio Office Supplies Income Statement For the Year Ending 12/31/2008 $24,000,000 Less: Variable cost of goods sold $12,600,000 Variable selling expense 2,400,000 15,000,000 Contribution margin 9,000,000 Less: Fixed production expense Fixed selling expense 1,800,000 1,200,000 Fixed administrative expense 2,400,000 5,400,000 Net income $ 3,600,000