Question

1. Salespersons' Report and Analysis

   Walthman Industries Inc. employs seven salespersons to sell and distribute its product throughout the state. Data taken from reports received from the salespersons during the year ended December 31 are as follows:

   Salesperson	Total Sales		Variable Cost of Goods Sold			Variable Selling Expenses
   Case	$620,000		$266,600			$136,400
   Dix	360,000		158,400			79,200
   Johnson	585,000		193,050			99,450
   LaFave	505,000		257,550			90,900
   Orcas	423,000		152,280			63,450
   Sussman	594,000		285,120			112,860
   Willbond	480,000		182,400			72,000

   Required:

   1. Prepare a table indicating contribution margin, variable cost of goods sold as a percent of sales, variable selling expenses as a percent of sales, and contribution margin ratio by salesperson. Round percents to the nearest whole number. Enter all amounts as positive numbers.

   Waltham Industries Inc.
   Salespersons' Analysis
   For the Year Ended December 31
   Salesperson	Contribution Margin	Variable Cost of Goods Sold as a Percent of Sales	Variable Selling Expenses as a Percent of Sales	Contribution Margin Ratio
   Case	$	%	%	%
   Dix		%	%	%
   Johnson		%	%	%
   LaFave		%	%	%
   Orcas		%	%	%
   Sussman		%	%	%
   Willbond		%	%	%

   2. Which salesperson generated the highest contribution margin ratio for the year?

   3. Identify the factors other than contribution margin that should be considered in evaluating the performance of salespersons.

   1. Rate of growth in sales for the current year compared with past years
   2. Years of experience for salespersons
   3. Size of sales territory
   4. Actual sales compared with budgeted sales
   5. All of the above

Answer 1

The table as computed is stated below:

Sales person	Total Sales	Variable Cost of Goods Sold	Variable Selling Expenses	Contribution Margin	Variable Cost of Goods Sold as a % of Sales	Variable Selling Expense as a % of Sales	Contribution Margin Ratio
A	B	C	D	E=B-(C+D)	F=C/B%	G=D/B%	H=E/B%
Case	$620,000	$266,600	$136,400	$217,000	43%	22%	35%
Dix	360,000	158,400	79,200	$122,400	44%	22%	34%
Johnson	585,000	193,050	99,450	$292,500	33%	17%	50%
LaFave	505,000	257,550	90,900	$156,550	51%	18%	31%
Orcas	423,000	152,280	63,450	$207,270	36%	15%	49%
Sussman	594,000	285,120	112,860	$196,020	48%	19%	33%
Willbond	480,000	182,400	72,000	$225,600	38%	15%	47%

As clearly evident from the chart Johnson generated the highest contribution margin ratio for the year at 50%. He is just better than Orcas which gave a 49% contribution margin.

Contribution margin alone cannot be regarded for evaluating the performance of salesperson. The other factors which need to be considered in evaluating the performance should be

Volume of Sales: Sales is considered as a very important factor as a performance factor. It measures to what extent the market is overed by the company. Hence in terms of volume of sales, Case leads with $620,000 sales

Variable Selling Expenses: The variable cost of goods sold is not in hands of the salespersons, but variable selling expenses is. Hence the salesperson generating sales with minimal cost of sales should be considered as a good performance. In this case Orcas and Willbond have shown good performance incurring only 15% variable selling expenses.

Again out of the options given here, "All of the above holds good" as each of these other factors are important to be considered in evaluating the performance of sales persons.