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Your company has a market share of the 25%. The total market size is the $100 million. Your contribution margin (the ratio of contribution per unit over price per unit) is 20%. Your variable cost is the $16 per unit. You’re thinking of appointing ten more salespeople. The yearly cost per salesperson (comprising salary and benefits) is $120,000. Additionally, each salesperson receives as a bonus 10% of sales he or she generates. How much should your market share raise to make this a profitable action?

(Hint: To resolve the problem you require calculating the price per unit and then calculating the new contribution per unit which will reflect the added cost of 10% bonus given to the salespeople.) You should show all computations to receive credit

Operation Management, Management Studies

  • Category:- Operation Management
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