Murphy Consumer Products

Murphy Consumer Products is a multilevel marketing firm that sells and distributes vitamins, cosmetics, and household cleaning products to household consumers.  Its products are promoted and distributed through a salesforce that is recruited primarily from college students during the winter and summer breaks.  Students are recruited by answering ads which read, "Managers Needed Now! We Pay $10!  No Experience Necessary!"  Murphy provides very little training, and after new recruits have made initial sales to friends, relatives, and acquaintances, their productivity declines and they eventually quit.  These initial sales are, nonetheless, very profitable to Murphy.

Murphy has, on average, about 280 salespeople listed on the payroll at any given time, and this has held relatively constant for several years.  Murphy has been recruiting, on average, about 975 students per year for the past four years. New recruits are initially given a four hour seminar in which they are taught a canned sales presentation.

The sales presentation typically takes an hour and fifteen minutes with each new prospect.  Murphy recruits are told that they will receive $10 for each qualified prospect to whom they make a demonstration, but that they must make at least twenty demonstrations per week to be able to receive this bonus.  Whether or not this quota is met, Murphy pays an eighteen percent commission on sales.  Murphy recruiters suggest that new recruits should be able to close a sale on one out of four prospects, and that a typical sale is an order of about $150.

Answer each of the following questions.  Show ALL of the calculations that were necessary to derive your answer.  Be sure that all numbers are clearly labeled as to units or what they represent.

  1. What is the salesforce turnover at Murphy?



  3. If one spends an average of 45 minutes round-trip in travel time for each prospect, how much time must be spent to receive the $10 bonus?



  5. If a new recruit is typical with regard to the estimated closing ratio and order amounts, and does meet the quota of 20 sales calls per week, what would be the expected earnings?



  7. Mary made 14 sales calls last week with total sales of $2235.  What will be her earnings for the week?



  9. John has just closed the week with 23 sales calls, 19 to new prospects, and four to friends who have purchased in the past.  The four friends made purchases totaling $475, and one of the new prospects resulted in a sale of $239.  What are John's earnings for the week?



  11. Pat is thinking of "going full time" for the summer 12 week selling period as a "Level Two Summer College Manager" for Murphy.  Pat will receive a $2,000 bonus by signing on recruits who collectively make a total of 1000 sales presentations during this specified 12-week period, whether or not these are within the quota limits for each individual.  (The Manager doesn't count in these totals.)  Pat estimates that 30 minutes of round-trip travel time is needed for each presentation on average, since many of the sales calls will be made locally in a very densely populated area around the campus.  If Pat recruits students who can be expected to work a full 40 hour week during these summer weeks, how many students must Pat recruit before the start of this period to have a reasonable chance of meeting the 1000-call quota?