Cost Effectiveness, business and finance homework help

Please read the case and answer the following questions below. I am providing power point slides from the chapter 9 and the instructor’s manual from a earlier edition to help answer the questions. The instructors manual points out what the instructor is looking for. you do not have to show calculations.

Case Analysis

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You run Tricky Nicky’s Carpet Cleaning Co., which cleans carpets for businesses. On average, one carpet cleaner can clean six offices per eight-hour shift. Currently, 100 cleaners work for you, and they work 250 days per year. Supervisors inspect carpets when cleaners notify them that the carpet is done. Because of Nicky’s “Satisfaction Guarantee,” when a carpet does not meet the standard, it is redone immediately at no extra cost to the client. A recent analysis of the rework required found that, on average, one in every six carpets cleaned does not meet Nicky’s standards.

The profit averages $20 a cleaning. You pay your cleaners $15 per hour. When you re-clean a carpet, it is done on overtime and you lose, on average, $20 in labor costs. On average, your profit is gone. In addition, there is an average cost of materials and equipment of $2.00 per office.

Your training manager conducted a needs assessment regarding this issue at your request. He reported that half the employees are not reaching the standard one in nine times, and the other half are not meeting the standard two in nine times, for an overall average of one in six [(1/9 1 2/9)/2 = 1/6]. The needs assessment also indicated that the cause was a lack of KSAs in both cases.

The training manager proposes a training program that he estimates will reduce everyone’s errors to 1 carpet in 12 (half the current level). The training would take four hours and could handle 20 employees per session.

The following costs reflect delivery of five training sessions of 20 employees each and assume 250 working days in a year.

Developmental Costs
 20 days of training manager’s time for design and development at $40,000 per year $ 3,200
 Miscellaneous $ 800
Direct Costs
 4 hours per session at $40,000 per year (trainer) $ 400
 Training facility and equipment $ 500
 Materials $ 2,000
 Refreshments $ 600
 Employee salaries at $20 per hour per employee (Nicky decides to do training on a Saturday and pay employees an extra $5 per hour as overtime) $ 8,000
 Lost profit (none because training is done on overtime) 0
Indirect Costs
 Evaluation of training; 10 days of training manager’s time at $40,000 per year $ 1,600
 Material and equipment $ 600
 Clerical support—20 hours at $10 per hour $ 200

se Questions

  1. How much does the re-cleaning cost Nicky per year? Show all mathematical calculations.
  2. If everyone is trained, how much will the training cost? How much will training cost if only the group with the most errors is trained? Show costs in a spreadsheet and all mathematical calculations.
  3. If everyone is trained, what is the cost savings for the first year? If only the group with the highest re-cleaning requirements is trained, what is the cost savings for the first year? Show all mathematical calculations.
  4. What is your recommendation for this training based on the expected return on investment? Should just the group with the most re-cleanings be trained or should both groups be trained? Provide a rationale for your recommendation that includes both the financial as well as other factors that may be important in making this decision. Show any mathematical calculations used.
  5. Let’s back up and assume that employees had the KSAs needed to clean the offices effectively. What other factors might you look at as potential causes of the re-cleaning problem?
 
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