Background: Nicky's Carpet Cleaning Company
You run Nicky's Carpet Cleaning Company which cleans carpets for commercial businesses. On average one carpet cleaner can clean six offices in a seven hour shift, Monday through Friday. You have 100 cleaners currently working for you, and they work 250 days per year. A recent analysis of the rework that must be done finds that, on average, one in every 6 carpets cleaned is not up to your standards. Because of Nicky's "Satisfaction Guarantee" when a carpet does not meet the standards it is redone immediately at no extra cost to the customer.
The profit on cleaning each office is $25. You pay your cleaners $15 per hour. ($105 per day) When you have to re-clean a carpet you lose $20 in employee time.
Your training manager has done a needs assessment regarding this issue at your request and has identified the cause as being a lack of KSA's. The training manager proposes a training program that he estimates will reduce the re-cleaning by 50%. The training would take 4 hours and they could train 25 employees per session. Training could therefore be completed for all 100 employees over two Saturdays, by running two four hour sessions on each Saturday.
Costs Associated With Training
Postage to mail out pre-training materials to all employees
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$300 |
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20 days of training manager's time for creation of training program
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$3,200
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Training Facilitator Costs ($325 per day)
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$650
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Training Facility Rental
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$1000
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AV Equipment Rental for 2 Days ($1000 per day)
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$2,000
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Refreshments for employees
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$600
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Employee Wages (Nicky decides to conduct training on a Saturday and pay his employees an extra $5 per hour as overtime) $20 per hour per employee
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$8000
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Cost of Facilitators Hotel Room/Expenses
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$600
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Clerical Support to assist training manager in creating Program- (20 hrs @ $10 per hr.)
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$200
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External Consultant Fees associated with reviewing Training Program created by training manager
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$800
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Photocopying costs to produce brochure for all employees with training information sent out prior to training.
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$200
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Administrative support to prepare attendee lists/schedules for training dates ( 10 hrs. @ $12 per hour)
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$120
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Cost to purchase new LCD projector for training department to share as old one no longer works
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$2000
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Case Study Questions -
1. In reviewing the related costs associated with the training program please identify which ones falls into the following categories:
Development Costs
Direct Costs
Indirect Costs
Trainee Compensation
Overhead Costs
2. How much do the re-cleanings cost Nicky each year? Show all mathematical calculations.
3. After the training is complete, what is the estimated annual cost savings each year? Show all mathematical calculations.
4. What is the total cost of conducting the training?
5. If training was cancelled the day before, what would the training costs then be? (Assume no cancellation fees would apply) Please list items, show related costs and provide a final total.