Haverwood Furniture Co.

Matthew Burns

Dr. Patnode

MKT210

5 December 2017

Haverwood Case: Part B

Summary

        Haverwood Furniture Co. is merging with another furniture company called Lea-Meadows Incorporated. The problem that we are trying to solve is whether or not to keep Lea-Meadows current outside sales people or distribute the work to the inside sales people. The sales staff at Haverwood consists of 10 employees and the sales staff of Lea-Meadows consists of 15 employees. If Haverwood would give their current sales staff the extra work, more sales people would need to be hired.

Data

Breakeven

10 sales people x $70,000 = $700,000 = $130,000

(.005x) + $830,000 = .05x

$830,000 = .045x

X = $18,444,444.44

Expected sales = $75 million + $5 million = $80 million

Breakeven Analysis

Since the breakeven is less than the expected sales, this means Haverwood should get rid of Lea-Meadows outside sales people and delegate the workload on their current inside sales people. If Haverwood were to do this, they will need to hire more sales people. We would need to figure out how many more employees it will take to cover the workload. This is based off people making 5-7 calls a year.

Increasing Sales Force

Need Sales people = 1,000 x 7 x 3.5/1,500 = 17 people

Need sales people = 1,000 x 5 x 3.5/1,500 = 12 people

Increasing in costs = $70,000 x 7 = $490,000

Increase in costs = $70,000 x 2 = $140,000

Conclusion

In conclusion, Haverwood should hire just 2 new inside sales employees. Their sales employees will continue to only make 5 sales calls a year. If 7 calls were to be made a year this would mean that they would need to hire 7 new employees which would cost too much money.