Managerial Economics

To estimate the additional dollar cost of each additional salesperson, you would want to consider the cost of recruiting, hiring, and setting up each individual with the necessary tools, such as computer and office space, as well as the cost of training and orientation. These costs can vary from company to company and should be taken into consideration when coming up with an estimate. Based on the company's past sales experience, you can use historical sales data to estimate the expected net revenue generated by an additional salesperson. This data can include how much sales each existing salesperson is responsible for, their average sales per transaction, and any changes in the company's products or pricing that could affect sales. Knowing this information, you can make a more informed estimate as to how much an additional salesperson could bring in. To determine whether a sales force increase or possibly a decrease is warranted, you would use the additional cost of each salesperson and the expected net revenue generated by an additional salesperson to calculate the cost-benefit ratio. You can do this by taking the expected net revenue and subtracting the additional cost of each salesperson and dividing the difference by the additional cost of the salesperson. If the cost-benefit ratio is greater than 1, then it may be worth increasing the size of the sales force, however if it's less than 1, it may be better to consider other options such as decreasing the sales force.