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September 22, 2014

Homework Help: Managerial Economics

Posted by BJ on Sunday, December 20, 2009 at 5:15pm.

As a VP 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 sales person? Based on your company's past sales experience, how would you estimate the expected net revenue generated by an additional sales person?

How would you use these cost an revenue estimates to determine whether a sales force increase (or possibly a decrease) is warranted?

I am thinking Sensitivity Analysis should be applied to this concept. Do you agree? But without any figures it would be hard to use the below equation, correct?

Break-Even Point in Sales = Total Fixed Costs / Contribution Margin Ratio

Thanks,

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