Question

Tyson Foods is the largest U.S. beef and chicken supplier,
processing more than 100,000 head of cattle and 40-plus
million chickens weekly. Primary distribution channels are
supermarket meat departments. However, the company is
now expanding distribution into convenience stores. There
are almost 150,000 gas stations and convenience stores
where the company would like to sell hot Buffalo chicken
bites near the checkout. This is a promising channel, as sales
are growing considerably at these retail outlets and profit
margins on prepared foods are higher than selling raw meat
to grocery stores. Tyson will have to hire 10 more sales representatives
at a salary of $45,000 each to expand into this
distribution channel because many of these types of stores are
independently owned. Each convenience store is expected to
generate an average of $50,000 in revenue for Tyson.

10-13. If Tyson’s contribution margin is 30 percent on this
product, what increase in sales will it need to break even
on the increase in fixed costs to hire the new sales reps?
(AACSB: Communication; Analytical Reasoning)

10-14. How many new retail accounts must the company
acquire to break even on this tactic? What average number
of accounts must each new rep acquire? (AACSB:
Communication; Analytical Reasoning)

Answer 1