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Popular Exam Question on Average Performance Ratios

Popular Exam Question on Average Performance Ratios. Ted Mitchell. You have a firm that is selling in three markets In each market you are recording the profit from the sales force effort (ROME) as a measure of sales force productivity. Home market: Profit $150k, ROME = $30k/salesman

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Popular Exam Question on Average Performance Ratios

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  1. Popular Exam Question on Average Performance Ratios Ted Mitchell

  2. You have a firm that is selling in three markets • In each market you are recording the profit from the sales force effort (ROME) as a measure of sales force productivity. • Home market: Profit $150k, ROME = $30k/salesman • Domestic market:Profit: $100k, ROME= $20k/salesman • Foreign market:Profit $90K, ROME= $5k/salesman • What is the average return per salesman (ROME) for your firm?

  3. The popular wrong answer is • Wrong average ROME =($30k/salesman + $20k/salesman +$5k/salesman)/3 • $55k/salesman/3 = $18.3k/salesmen

  4. You have a firm that is selling in three markets • In each market you are recording the profit from the sales force effort (ROME) as a measure of sales force productivity. • First Expand the DataProfit = ROME x (No. of Salesmen) • Home market: Profit $150k, ROME = $30k/salesman • Domestic market:Profit: $100k, ROME= $20k/salesman • Foreign market:Profit $90K, ROME= $5k/salesman

  5. First Expand the Datainto all the components Profit = ROME x (No. of Salesmen) • Home market: Profit $150k, ROME = $30k/salesman • $150k = $30k x 5 salesmen • Domestic market:Profit: $100k, ROME= $20k/salesman$100k = $20k x 5 salesmen • Foreign market:Profit $90K, ROME= $15k/salesman • $90k = $5k x 18 salesmen

  6. Profit ??????/salesperson $30k/salesperson $150k $20k/salesperson $100k $5k/salesperson $90k 18 5 Salesmen

  7. Second find total effort and total profit • Home market: $150k = 30k x 5 salesmen • Domestic market:$100k = 20k x 5 salesmen • Foreign market:$90k = $15k x 18 salesmen • Total market: $340k = ROME x 28 salesmen • Third Calculate the Average ROME • Average ROME = $340k/28 • Average ROME = $12.14k/salesman

  8. $340k Profit $12.14k/salesperson $30k/salesperson $150k $20k/salesperson $100k $5k/salesperson $90k 18 28 5 Salesmen

  9. Compare the wrong • ROME = 18.3/salesperson • to the correct answer • ROME 12.14/salesperson

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