Management is questioning proposals by the HR department to increase spending on training. You know that well-trained employees are more productive, but how do you quantify that? In this assignment, you will compare the cost of training with the savings from productivity improvements due to training. By calculating the return on investment (ROI), you will gain a better understanding of the value of allocating budget resources to training. The company spends $8,000 per quarter in wages for each Level 1 employee. Productivity is currently 200 units per worker, requiring 500 Level 1 employees to meet the production goal of 100,000 units. By spending $60,000 on training, it is projected that productivity can be increased 2%. Respond to the questions below to calculate the ROI and decide if the investment is worthwhile.
1. What is the new productivity, if it increases 2% over the current 200 units per worker?
2. How many employees will be required to meet the production goal of 100,000 units at the new level of productivity?
3. What is the savings from the reduced number of Level 1 employees?
4. ROI for training expense?