HRM 420 Week 4 Homework Part 2
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1. Training return on investment (ROI) is a calculation of economic return on a project.
An organization lost 125 employees last year, at a cost of $5,000.00 each. (Value is derived from cost to rehire and fill opening, as well as lost investment in the employee.) You suggest that a one-time investment in a training program (costing $250,000 up front) will reduce turnover by 50%. Calculate the following numbers using historical figures as your assumptions.
2. Cost-benefit analysis presents data as a ratio to determine financial impact on company profitability. The formula is: cost-benefit ratio = value of projected benefits divided by cost.
We have estimated that a training program on sexual harassment will cost $14,000 and result in a savings of $70,000 (the cost of the two settlements we paid last year).
Value of projected benefits = $70,000 Cost = $14,000.00
3. Break-even analysis. This is the point in which revenue (or savings) from the program equals the cost of the program-the time the company has "broken even" on the cost of the training.
Formula = Break-even point = cost/savings * time
time is the period of time in which the return is being calculated, if annually, then 12months.
4. Why is it important for trainers to be able to estimate the ROI, cost-benefit analysis, and break-even analysis? Give three reasons why calculating this information will assist the training endeavors.