How much more profit, if any, will the company make? Write a memo to Rob, politely explaining why he is wrong.

Cost Classifications locStains produces wood stains and sells through independent hardware stores. In 2020, they produced and sold 295,000 gallons at $14 per gallon. There was no beginning or ending inventory. Income Statement Y/E 12/31/2020 Sales $4,130,000 Less, Cost of Goods Sold 2,902,000 Gross profit $1,228,000 Less, Selling & Administrative Expenses: Selling $805,500 Administrative 340,000 1,145,500 Net Income $82,500 Gross profit margin = $1,228,000 + $4,130,000 = 29.7% The VP of Sales, Rob Appenzeller, has just negotiated deals with several large construction companies. He estimates sales will increase in 2021 by 50,000 gallons (at a reduced price on these orders of $12.00 per gallon.) I Rob presented a rough estimate of the financial impact on the company: Additional Sales (gallons) 50,000 Selling price per gallon $12.00 Incremental Revenue $600,000 Gross profit % 29.7 Incremental Profit $178,200 No-one in senior management questioned Rob's numbers. You are an accounting intern at losStains. You question the calculation: "Fixed production costs, like rent and depreciation, are about $1,250,000 per year. Shipping costs, the only variable selling expense, is around $0.50 per gallon. If we look at things on a variable costing basis we may see a different result." How much more profit, if any, will the company make? Write a memo to Rob, politely explaining why he is wrong. Focus