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The 100-employee research and development department of a local brewery has been experiencing an abnormally high turnover rate for the industry. A survey of employees revealed that the most-reported reason for leaving was dissatisfaction with the level of training offered by the company. At the time, the average turnover rate was 20% per year. The cost to recruit one replacement employee was $30,000. To address the turnover problem, the brewery has decided to develop a skills training program that averages 60 hours annually per employee. The average employee wage is $15/hour. Instructor, classroom, and other costs for training were $80,000. 1. What is the total cost of training? The total cost of turnover? a. HINT: Remember that training costs include both direct costs (e.g., instructor, classroom, and other costs) and indirect costs (e.g., wages that must still be paid to workers while attending training). 2. Assume that after implementing the training program, turnover drops from 20% to 5%. a. What is the cost savings associated with the turnover drop? b. What is the net financial benefit of the training program (i.e., turnover savings minus total cost of training)? 3. What is the ROI of the skills training program? For every dollar invested in the training program, how much is returned in benefits? 4. Based on your results to Question 3, should the company continue using the training program? Why or why not? Justify your response using the figures you calculated in the question above. program's effectiveness. One way to evaluate a training program is by performing a cost-benefit analysis by calculating Return on Investment (ROI). Remember that ROI is calculated using the following formula: ROI = Return / Investment = (Benefits - Costs) / Costs The 100-employee research and development department of a local brewery has been experiencing an abnormally high turnover rate for the industry. A survey of employees revealed that the most-reported reason for leaving was dissatisfaction with the level of training offered by the company. At the time, the average turnover rate was 20% per year. The cost to recruit one replacement employee was $30,000. To address the turnover problem, the brewery has decided to develop a skills training program that averages 60 hours annually per employee. The average employee wage is $15/hour. Instructor, classroom, and other costs for training were $80,000. 1. What is the total cost of training? The total cost of turnover? a. HINT: Remember that training costs include both direct costs (e.g., instructor, classroom, and other costs) and indirect costs (e.g., wages that must still be paid to workers while attending training). 2. Assume that after implementing the training program, turnover drops from 20% to 5%. a. What is the cost savings associated with the turnover drop? b. What is the net financial benefit of the training program (i.e., turnover savings minus total cost of training)? 3. What is the ROI of the skills training program? For every dollar invested in the training program, how much is returned in benefits? 4. Based on your results to Question 3, should the company continue using the training program? Why or why not? Justify your response using the figures you calculated in the question above. program's effectiveness. One way to evaluate a training program is by performing a cost-benefit analysis by calculating Return on Investment (ROI). Remember that ROI is calculated using the following formula: ROI = Return / Investment = (Benefits - Costs) / Costs
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Related Book For
Management Accounting
ISBN: 9780730369387
4th Edition
Authors: Leslie G. Eldenburg, Albie Brooks, Judy Oliver, Gillian Vesty, Rodney Dormer, Vijaya Murthy, Nick Pawsey
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