As vice president of sales for a rapidly growing company, you are grappling with

Question

As vice president of sales for a rapidly growing company, you are grappling with the question of expanding the size of your direct sales force (from its current level of 60 national salespeople). You are considering hiring from 5 to 10 additional personnel.

How would you estimate the additional dollar cost of each additional salesperson? Based on your company’s past sales experience, how would you estimate the expected net revenue generated by an additional salesperson? (Be specific about the information you might use to derive this estimate.) How would you use these cost and revenue estimates to determine whether a sales force increase (or possibly a decrease) is warranted?

Explanation / Answer

To calculate the additional cost of an additional sales person we would differentiate the TOTAL COST function to find the MARGINAL COST.The MC shows an increase in total cost of the firm when an additional salesperson is employed.

To calculate the expected net revenue increase due to an additional salesperson we differentiate the TOTAL REVENUE function with respect to workers, to find the MR.MR gives the increase in revenue due additional people employed.

Clearly the firm would employ additional sales persons only if or MR > MC.If MR<MC firm's increase in revenue by employing additional people would be less than the increase in costs incurred.Thus if MR<MC firms wont employ additional sales persons.At MR = MC firm would be indifferent between employing or not employing additional salesforce.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.