Scott Is a Sales Representative for the Industrial Products Division

question 56

Essay

Scott is a sales representative for the industrial products division of an oil company.His major accounts are companies with large truck fleets, quick oil change chains aimed at the consumer, and municipalities.He wants to replace the small cities as customers because they negotiate price to a thin profit margin.What would be a good indicator that he could 'fire' these customers?

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Definitions:

Contribution Margin

The amount by which a product's sales revenue exceeds its variable costs, contributing towards covering fixed costs and generating profit.

Gross Margin

The difference between sales revenue and the cost of goods sold, representing the core profitability of a company's products.

Variable Cost

Costs that vary directly with the level of production or business activity, including expenses such as raw materials and labor.

Machine Hours

The total operating time of machinery used in the production process during a specific period.