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Customer Profitability Olin Company manufactures and distributes carpentry tools, Production of the tools is in the mature portion of the product life cride, Min has a saler force of 20. Salespeople are paid a commission of 7 percent of sales. plias expenses of sas per day for days spent on the road away from heme, tilus 50,50 per mile. They dellver prodects in addition to making the sales. and oach sales person is reguired to own a truck sultabie for making dellueries. For the coming quarter; Oiln estimates the following: On averape, a falesperson travels 6,000 miles per quarter and spends 38 days on the road. The fixed marketing and administrative expenses total 5400,000 per quarter. Required: 1. Prepare an income statement for Olin Company for the next quarter 2. Suppose that a laroe hardware chain, Megakardware, Incy wants Clin Corneany to produce its new Supertool line. This would reguire Clin Company to seli 60 percent of total output to the chain. The toods will be imprinted with the Superfool brand, raquiring Olln to eurchase new equipitient, the somewhat different materials, and reconfigure the production line. Dlin's industrial enginerers estimate that cost of goods sold for the 5 uperfool lnith would increase by 15 percent. No sales commission would be incurred, and Megarlardware would link olin to its EDt system. This wald reguire an annual cost of $100,000 on the part of Olin. MegaHardware would pay shipping. As a regit, the tales force would ahrink by a0 percent. Prepare a revised income statement for Olin Cornpany for the next quarten. Should Olin accept MegaHardware's offer

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