2. Fred’s Cool Stuff specializes in unique and odd items that they sell to retai
ID: 3199272 • Letter: 2
Question
2. Fred’s Cool Stuff specializes in unique and odd items that they sell to retailers through a traveling sales force as well as an online catalog. For the past six months, the owner of Fred’s Cool Stuff has tracked the total sales figures, as well as the costs to maintain both the traveling sales force and the online catalog. Use the data in the table below to answer the following questions:
Calculate the productivity for the Sales Force for the past six months.
Calculate the productivity for the Online Catalog for the past six months.
Between the Sales Force and the Online Catalog, which is more productive?
Calculate the multi-factor productivity for both sales methods.
Of all productivity methods, which delivers the lowest cost per sales dollar?
MONTH
Sales Force
Online Catalog
TOTAL SALES
1
$200,000.00
$50,000.00
$4,790,000.00
2
$210,000.00
$65,000.00
$5,750,000.00
3
$221,000.00
$85,000.00
$6,900,000.00
4
$230,000.00
$110,000.00
$8,280,000.00
5
$245,000.00
$145,000.00
$9,930,000.00
6
$255,000.00
$190,000.00
$11,920,000.00
MONTH
Sales Force
Online Catalog
TOTAL SALES
1
$200,000.00
$50,000.00
$4,790,000.00
2
$210,000.00
$65,000.00
$5,750,000.00
3
$221,000.00
$85,000.00
$6,900,000.00
4
$230,000.00
$110,000.00
$8,280,000.00
5
$245,000.00
$145,000.00
$9,930,000.00
6
$255,000.00
$190,000.00
$11,920,000.00
Explanation / Answer
Since we have no information about the individual contribution of both the sales channels, we will Assume that both have contributed equally, which is half of the total sales is the sales contribution of both the channels for calculation productivity.
1) Productivity of the sales force
= Sum of total Sales for 6 months (in $ million) / Sum of cost for sales force (in $ million)
= [0.5*(4.79+5.75+6.9+8.28+9.93+11.92)]/(0.2+0.21+0.23+0.221+0.245+0.255) = (0.5*47.57)/1.361
=17.475 dollar sales/ dollar cost
2)
Productivity of the online catalogue
= Sum of total Sales for 6 months (in $ million) / Sum of cost for sales force (in $ million)
= [0.5*(4.79+5.75+6.9+8.28+9.93+11.92)]/(0.05+0.065+0.085+0.11+0.145+0.19) = (0.5*47.57)/0.645
=36.875 dollar sales/ dollar cost
3)
From the above, the online catalogue looks to be more productive than the sales force.
4)
The multi-factor productivity = total sales / sum of costs of both the channels = 47.57/(1.361+0.645)
=23.71 dollar sales/ dollar cost
5) Since we have expressed productivity in terms of dollar sales/ dollar cost, and now we have to find which has got the lowest dollar cost/ dollar sale , which is inverse of productivity, thus the channel with highest productivity will be the channel with lowest cost/ dollar sales. Since online catalogue has got the highest productivity, therefore it will have the lowest cost/ dollar sales value.
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