One of the First Sales Management Decisions a Firm Must

question 144

Essay

One of the first sales management decisions a firm must make is whether the company should build its own salesforce or hire independent agents such as manufacturers' representatives. Abacus Designs sells high-end furniture to retailers and needs to make this decision. Independent agents would receive a 5 percent commission on sales while a company salesforce would receive a 3 percent commission, salaries, and benefits. In addition, with company salespeople, sales administration costs would be incurred for a total fixed cost of $500,000 per year. At what sales level would independent salespeople be less costly?

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Definitions:

Profits

The financial gains obtained when the revenues from a business activity exceed the expenses, costs, and taxes needed to sustain the activity.

Wage Rate

The standardized amount of compensation received by an employee for performed work per unit of time, typically expressed per hour or year.

Bushel of Corn

A unit of measure for volumes of dry commodities, typically used in the U.S. for agricultural goods like corn, where one bushel equals approximately 56 pounds.

Workers

Individuals engaged in an activity, especially to earn an income.