4-3 In-Sourcing Sales Force Five years ago, to respond to cost-cutting pressure

Question

4-3 In-Sourcing Sales Force Five years ago, to respond to cost-cutting pressure during a weak economy, your company decided to close five sales offices employing five people each. Currently your company employs independent sales agents who earn a 2.5% commission on all sales. The economy has recently turned around, and one of your colleagues suggests that you could hire 25 people for $50,000 per employee to do the sales job as independent agents at a cost of goods sold (COGS) of only 0.5%. What concerns might you have about such an approach?

Explanation / Answer

second approach is favourable for the company because it is saving 2.5% -0.5% =2% per employee

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