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Question(s) / Instruction(s):

Your company has a market share of 25%. The total market size is $100 million. Your contribution margin (the ratio of the contribution per unit over the price per unit) is 20%. Your variable cost is $16 per unit. You are thinking of hiring 10 more salespeople. The annual cost per salesperson (including salary and benefits) is $120,000. In addition, each salesperson receives as a bonus 10% of the sales he or she generates. How much should your market share increase to make this a profitable action?

(Hint: To solve the problem you need to calculate the price per unit and then calculate the new contribution per unit that will reflect the added cost of the 10% bonus given to the salespeople.)

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