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Suppose that you have a target of $1,000,000 in sales for your department this fiscal year, and you know that you can either hire cheap high-school graduates, or more expensive college graduates
Suppose that you have a target of $1,000,000 in sales for your department this fiscal year, and you know that you can either hire cheap high-school graduates, or more expensive college graduates. You won't be able to hire a college graduate for less than $60,000 per year, while you can find high-school graduates for $30,000. Suppose that you expect each high-school graduate to realize $50,000 in sales. What is the minimum amount of sales for college graduates that justifies hiring them?
Expert Solution
1. Calculating the minimum amount of sales for college graduates that justify hiring them
Target = $1,000,000
sales
Expecting each high-school graduate realize= $50,000 sales
High-school graduate pay =PH=$ 30000
High-school graduate extra sales =VMPH=$50000
College graduate pay =PC=$60000
College graduate extra sales =VMPC=K
Optimal allocation =
VMPHPH=VMPCPC
$50000$30000=k$60000
=50000×60000$=30000k$
Solving for k we have;
(50000×60000)(30000)=k
=$100,000
Hence college graduates minimum amount of sales that justify hiring them is equal to $100,000
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