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As vice president of sales for a rapidly growing company, you are grappling with the question of expanding the size of your direct sales force (from its current level of 60 national salespeople). You are considering hiring from 5 to 10 additional personnel. How would you estimate the additional dollar cost of each additional salesperson?

Based on your company's past sales experience, how would you estimate the expected net revenue generated by and additional salesperson? (Be specific about the information you might use to derive this estimate.)

How would you use these cost revenue estimates to determine whether sales force increase (or possibly a decrease) is warranted?

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Solution Summary

Marginal analysis and employment decisions

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The cost of each salesperson could be estimated by averaging the salaries of the current sales force. If for example the total cost of benefits and salaries is currently $3 million, we would know that each of the 60 current employees is costing the company $50,000.

We could also take our net revenue and divide this by 60. This would give us an ...

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