Using the following information, set up a spreadsheet in Excel (based on the one on the next page). Then, determine which of the systems you will choose based on the best savings in the first year.

Do not worry about present or future value of money in this exercise or your head will explode !!

System 1

• 500 users of the system @ $5/mo/user.
• Requires each user to have 10 hours of face-to-face training (2 five-hour days where the user will not be at his or her job). Training cost will be $35/hr, but only 50 users can be trained at any one seating.
• The average user makes $22/hr.
• Following the training, users must pass five evaluations to receive a certification of competence using the system. A member of HR staff will provide certification assessment.
• Evaluations are done by an HR staff member, and each complete five-part assessment takes the staff member 10 minutes. The certification assessment also requires recording the scores, as well as typing up and printing the certifications (another 10 minutes for each user).
• The staff member of HR providing the certification assessment makes $40/hr.
• This system produces 15 monthly reports automatically that are currently being done manually. The cost of the 15 reports (in time) currently cost your company approximately $3,600 ($10/hr * 30 hrs@2 hrs/report * 12 months).
• The employee turnover rate is currently 20% per year. This results in approximately 100 terminations and 100 new hires per year. Not counting outside recruiting fees, using an average cost of $4,200 per employee, the total cost for employee replacement is $420,000 per year. This system is estimated to reduce turnover by approximately 10%.
• This system is likely to reduce the need for (1) HR administrative staff FTE, saving the organization approximately $60,000/year, inclusive of salary and benefits.

System 2

• 500 users of the system.
• Monthly subscription fee of $1,800/mo, which includes the creation of training modules.
• Annual maintenance fee of $800.
• Requires each user to have 15 modules of online, on-demand training. Users will have the ability to do the training whenever and wherever they’d like, including a maximum of 10 hours at work (however, they will have to get permission to use work time from their manager).
• Each user will be evaluated using an online, automatically scored test after each module. No HR staff time will be required.
• The average user makes $22/hr.
• This system produces 10 monthly reports automatically that are currently being done manually. The cost of the 10 reports (in time) currently cost your company approximately $2,400 ($10/hr * 20 hrs@2 hrs/report * 12 months). However, 5 other monthly reports will have to continue to be done manually, as this system isn’t able to do them.
• The turnover rate is 20% per year. This results in approximately 100 terminations and 100 new hires per year. Not counting outside recruiting fees, using an average cost of $4,200 per employee, the total cost for employee replacement is $420,000 per year. This system is estimated to reduce turnover by approximately 4%.

Answer rating: 100% (QA)

To compare the two systems we need to calculate the total cost of each system and compare it to the ... View the full answer