Question

Assume a sales manager determines that in a given territory each salesperson sells approximately $500,000 yearly. Also, assume that the firm’s cost of goods sold is estimated to be 65 percent of sales and that a salesperson’s direct costs are $35,000 a year. Each salesperson works 48 weeks a year, eight hours a day, and averages five sales calls per day. Using this information, how much merchandise must each salesperson sell to break even?

Answer 1

Answer:

Each salesman must sell $77,778 worth of merchandise.

Explanation:

Giving the following information:

Assume that the firm’s cost of goods sold is estimated to be 65 percent of sales and that a salesperson’s direct costs are $35,000 a year.

To calculate the break-even point in dollars, we need to use the following formula:

Break-even point (dollars)= fixed costs/ contribution margin ratio

Break-even point (dollars)= 35,000/ (1 - 0.65)

Break-even point (dollars)= $77,778

Each salesman must sell $77,778 worth of merchandise.