Case Study Part 3

 Instructions

 Cost Benefits

Your company acquired a construction materials company and is evaluating the costs to conduct ongoing ergonomics training at its material manufacturing facility. Two safety professionals (hourly pay rate = $30/hr.) are to deliver the training. The course materials have already been developed, and the yearly ongoing cost for development and for materials is negligible. They offer fifteen different one-hour sessions per year, and an hour is required for scheduling and preparation for each session. Approximately 450 paid employees from the plant attend the training each year, with an average hourly pay rate of $15 per hour. In addition to the training time, cost of employee benefits is approximately 50 percent of the employee’s pay rate. Many larger corporations use a finance department to keep track of corporate finances. However, the department also keeps a budget of its finances and reports their financial statements of cost/revenue to the finance dept, but at the same time keeps separate financial details so they can forecast, plan, etc.

1. Compute the total yearly cost of the training.

2. What percentage of the total cost of the ergonomics training at the construction materials company are student costs?

3. Now consider the indirect costs of ergonomics training at the facility based on the following data: Each time wage employees attend the ergonomics training, production slows down. Although jobs are rotated to minimize the impact, historical data has shown that production drops by 5 percent on days when the training is delivered. The average profit value of one full shift of production at this plant is $5000. What is the total cost of ergonomics training when these indirect costs are included?

4. Further, the company is considering a new computer-based training course for lab safety. The total cost of the current training program is $80,000 per year. If the new training program will reduce these costs to $60,000 per year, what is the maximum acceptable cost to initiate the program to reach the break-even point within three years? What is the return on investment for that scenario?

5. Compare the two training alternatives below using the net-present-worth equation for a rate of return of 10 percent:

6. Name five possible financial benefits of safety training.

7.  What is the first step in a cost-benefit analysis of training?

8. Why is it important to keep a log of expenditures from a departmental budget even if the finance department keeps track of these for you?

9. If a cost-benefit analysis indicates that a training course is not financially beneficial to the organization, why might you still conduct the course?

  Submission

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