Customer Pro?tability Olin Company manufactures and distributes carpentry tools. Production of the..

Customer Pro?tability Olin Company manufactures and distributes carpentry tools. Production of the tools is in the mature portion of the product life cycle. Olin has a sales force of 20. Salespeople are paid a com-mission of 7 percent of sales, plus expenses of $35 per day for days spent on the road away from home, plus $0.50 per mile. They deliver products in addition to making the sales, and each sales-person is required to own a truck suitable for making deliveries. For the coming quarter, Olin estimates the following: Sales $1,300,000Cost of goods sold 450,000 On average, a salesperson travels 6,000 miles per quarter and spends 38 days on the road. The ?xed marketing and administrative expenses total $400,000 per quarter. Required: 1. Prepare an income statement for Olin Company for the next quarter.2. Suppose that a large hardware chain, Mega Hardware, Inc., wants Olin Company to pro-duce its new Super Tool line. This would require Olin Company to sell 80 percent of total output to the chain. The tools will be imprinted with the Super Tool brand, requiring Olin to purchase new equipment, use somewhat different materials, and recon ?gure the product I online. Olin ’ s industrial engineers estimate that cost of goods sold for the Super Tool line would increase by 15 percent. No sales commission would be incurred, and Mega Hard ware would link Olin to its EDI system. This would require an annual cost of $100,000 on the part of Olin. Mega Hardware would pay shipping. As a result, the sales force would shrink by 80percent. Should Olin accept Mega Hardware ’ s offer? Support your answer with appropriate calculations.