FireSpot wants to expand to the Midwest and western United States and intends to hire ten new sales representatives to secure distribution for its products. Each sales rep earns a salary of $50,000 plus commission. Each retailer generates an average $50,000 in revenue for FireSpot. If FireSpot’s contribution margin is 40 percent, what increase in sales will it need to break even on the increase in fixed costs to hire the new sales reps? 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)
FireSpot Inc. is a manufacturer of drop-in household fireplaces sold primarily in the eastern United States. The company has its own sales force that does more than just sell products and services; it manages relationships with retail customers to enable them to better meet consumers’ needs. FireSpot’s sales reps visit customers several times per year—often for hours at a time. Thus, sales managers must ensure that they have enough salespeople to adequately deliver value to customers. Refer to Appendix 2 to answer the following questions.