Question

?Wheels, Inc. is a manufacturer of bicycles sold through retail bicycle shops in the southeastern United States. The company has two salespeople who do more than just sell the? products-they manage relationships with the bicycle shops to enable them to better meet? consumers' needs. The? company's sales reps visit the shops several times per? year, often for hours at a time. The owner of Wheels is considering expanding to the rest of the country and would like to have distribution through 1 comma 000 bicycle shops. To do? so, however, the company would have to hire more salespeople. Each salesperson earns ?$55 comma 000 plus 2 percent commission on all sales. Another alternative is to use the services of sales agents instead of its own salesforce. Sales agents would be paid 7 percent of sales. Each sales call lasts approximately 2.4 ?hours, and each sales rep has approximately 480 hours per year to devote to customers. Wheels needs 20 salespeople if it has 1 comma 000 bicycle shop accounts that need to be called on four times per year. At what level of sales would it be more cost efficient for Wheels to use sales agents compared to its own sales? force? To determine the level of sales at which one alternative would be as efficient as the? other, set the costs equal to each other. Calculate the total costs for the salesforce option.

Answer 1