cheggcom Last year MedSuppliesa national supplier of medical

chegg.com Last year, MedSupplies-a national supplier of medical devices-posted its first loss in six years. The loss was a surprise to investors since the industry as a whole has been growing. Analysts have reached a consensus that at least part of the blame for the loss falls on Heidi Stevens, the national sales manager for MedSupplies. Ms. Stevens is responsible for determining the size of the firm\'s sales force, and over the past year, she engaged in a significant expansion. In this industry, it is well understood that revenues generally increase as the sales force grows. However, each new hire generally adds less new revenue than the last, as the best sales opportunities already have been exhausted. At the same time, the salaries for medical device salespeople essentially have been constant. Analysts summarize the problem in the accompanying figure. They note that Ms. Stevens appears to have expanded her sales force to point A and argue that her sales force is too big When approached for comment, Ms. Stevens replied, \"Of course I would choose point A in that graph! Anything less means the company underperforms.\" Both the analysts and Ms. Stevens agree that she has chosen point A in the graph as the size of her sales force but disagree on the wisdom of this decision. Who is right? Price (S) Total sales for

Solution

At Chegg we try to help student and solve your queries. Do give a thumbs up for the answer and the efforts put in.

The position Ms. Stevens is correct. Because looking at the graph we can say the company cannot hire more employees in the sales force. At the point A the optimum point would be to be below it. A is a risky point, because if you hire even few employees more then the sales will decline and the costs will increase.

Though it is clear that the sales had declined. Which means that even though Ms. Stevens wanted to be at point A, she had clearly over stepped it. And had she just been at point A, then the sales would have been the highest and the sales force be very correct.

On the other aspect Analyst highlight that She was at point A, but she was not at point A she was ahead of point A by the sales figure we can say that.

And hence we can say that aspect of Ms. Stevens is correct, as she wanted to be point A.

At point A we will have optimum sales and the moment we cross it the sales will decline due to increase in the cost on sales.