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Wheels, Inc. is a manufacturer of bicycles sold through retail bicycle shops in the southeastern United States. The company has two salespeople who do more
Wheels, Inc. is a manufacturer of bicycles sold through retail bicycle shops in the southeastern United States. The company has two salespeople who do more than just sell the products-they manage relationships with the bicycle shops to enable them to better meet consumers' needs. The company's sales reps visit the shops several times per year, often for hours at a time. The owner of Wheels is considering expanding to the rest of the country and would like to have distribution through 1,500 bicycle shops. To do so, however, the company would have to hire more salespeople. Each salesperson earns $50,000 plus 4 percent commission on all sales Another alternative is to use the services of sales agents instead of its own salesforce. Sales agents would be paid 6 percent of sales. Each sales call lasts approximately 1.2 hours, and each sales rep has approximately 1,200 hours per year to devote to customers. Wheels needs 12 salespeople if it has 1,500 bicycle shop accounts that need to be called on eight times per year. At what level of sales would it be more cost efficient for Wheels to use sales agents compared to its own sales force? If Wheels expects sales to be | than $ 1, then it would be more efficient to use sales agents. (Round to the nearest dollar.)
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