SuperSound Stereos sells high-end stereo equipment to specialty audio and video shops. SuperSound serves three different types of customers: small, medium, and large. Customers are placed into these categories based on the average revenue generated per visit—“small” customers yield average revenue of less than $20,000 per visit, “medium” customers yield an average revenue of $20,000 to $40,000 per visit, and “large” customers yield an average revenue of over $40,000 per visit. Data for a typical sales territory are provided below:

Salespersons can realistically spend 125 hours per month visiting customers and generating orders. Salespersons’ remaining time is spent in the head office filling out paperwork, learning about the company’s products, and attending sales meetings. With only 125 hours available per month to visit customers and generate sales revenue, salespersons unfortunately cannot visit all of the potential customers in their territory.

Required:
a. Traditionally, SuperSound’s salespersons have given top priority to large customers because these customers generate the most revenue per visit. Calculate monthly revenue in a typical sales territory if, in a given month, a salesperson first visits all the large customers, then visits all the medium customers and, finally, squeezes in as many small customer visits as possible.
b. Trey Foster is SuperSound’s top salesperson. In contrast to conventional wisdom, Trey focuses first on the small and medium customers and, if time permits, the large customers. He tells anyone who will listen that large customers are not worth the bother—“You can win a game with singles” is the mantra that Trey preaches.
Calculate monthly revenue using Trey’s sales strategy. How do you explain Trey’ssuccess?

Transcribed Image Text:

Customer Category SmallMedium Large 10 Number of customers in the territry 50 Average sales revenue per visit Average time to visit a customer 25 15,000 $30,000 $45,000 1.0 hour 2.0 hours 5.0 hours