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EVALUATION OF SALESMANS PERFORMANCE

A good performance evaluation system could be very useful in

1) Developing salesmanship as an inter-personal influence process.2) Motivation of salesman & supervisory leadership.3) Making decisions regarding selection, induction, training, award, promotion, transfer etc.

Steps:

1) Identifying the need for continuous training and development of sales force.2) Improving marketing aids, strategies and tools (example: working documents, demonstration

materials)3) Determining and restructuring salesmans territories and work assignments.

PROBLEMS IN EVALUATING SALESMANS PERFORMANCE

When evaluating the performance through quantitative measures, factors like personal biasand subjective judgment come into the picture.

Comparison between the performances of two salesman Standards should be set realistically Period of evaluation as short term results may not always be correct and long term results

may not be satisfactory Evaluation through quantitative methods may bring up some interesting data and intriguing

questions Accountability may also be a problem as increase in sales may not mean an increase in

profits

KEY POINTS IN AN EVALUATION SYSTEM

A performance evaluation system can motivate staff to do their best for themselves and thepractice by promoting staff recognition and improving communication.

Evaluations should be conducted fairly, consistently and objectively to protect your employeesand your practice.

An effective performance evaluation system has standardized evaluation forms, performancemeasures, feedback guidelines and disciplinary procedures.

CRITERIA FOR PERFORMANCE EVALUATION

Setting Objective Documented Salesperson Input Documented Supervisor Input Verbal Feedback Follow-up Consideration

Evaluation scheme requires that sales manager should: Organize sales activities into appropriate sales groups (such as industry, customer or product)

and/or sales territories; Delineate the salesmans job in each group or territories; Set benchmarks or standards of performance for each part of the job; Establish specific methods of evaluation and the criteria and techniques to be adopted.

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What is Marginal Costing?

It is a costing technique where only variable cost or direct cost will

be charged to the cost unit produced.

Marginal costing also shows the effect on profit of changes in

volume/type of output by differentiating between fixed and

variable costs.Salient Points:

Marginal costing involves ascertaining marginal costs. Since

marginal costs are direct cost, this costing technique is also known

as direct costing;

In marginal costing, fixed costs are never charged to production.

They are treated as period charge and is written off to the profit

and loss account in the period incurred;

Once marginal cost is ascertained contribution can be computed.

Contribution is the excess of revenue over marginal costs.

The marginal cost statement is the basic document/format to

capture the marginal costs.

Features of Marginal Costing System:

It is a method of recording costs and reporting profits;

All operating costs are differentiated into fixed and variable costs;

Variable cost charged to product and treated as a product cost

whilst

Fixed cost treated as period cost and written off to the profit and

loss account

Advantages of Marginal Costing:

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It is simple to understand re: variable versus fixed cost concept;

A useful short term survival costing technique particularly in very

competitive environment or recessions where orders are accepted

as long as it covers the marginal cost of the business and the

excess over the marginal cost contributes toward fixed costs so

that losses are kept to a minimum;

Its shows the relationship between cost, price and volume;

Under or over absorption do not arise in marginal costing;

Stock valuations are not distorted with present years fixed costs;

Its provide better information hence is a useful managerial

decision making tool;

It concentrates on the controllable aspects of business by

separating fixed and variable costs

The effect of production and sales policies is more clearly seen and

understood.

Disadvantages Of Marginal Costing

Marginal cost has its limitation since it makes use of historical data

while decisions by management relates to future events;

It ignores fixed costs to products as if they are not important to

production;

Stock valuation under this type of costing is not accepted by the

Inland Revenue as its ignore the fixed cost element;

It fails to recognize that in the long run, fixed costs may become

variable;

Its oversimplified costs into fixed and variable as if it is so simply

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to demarcate them;

Its not a good costing technique in the long run for pricing

decision as it ignores fixed cost. In the long run, management

must consider the total costs not only the variable portion;

Difficulty to classify properly variable and fixed cost perfectly,

hence stock valuation can be distorted if fixed cost is classify as

variable.