Reference no: EM131582558

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	$300
20 days of training manager's time for creation  of training program	$3,200
Training Facilitator Costs      ($325 per day)	$650
Training Facility Rental	$1000
AV Equipment Rental for 2 Days ($1000 per day)	$2,000
Refreshments for employees	$600
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	$8000
Cost of Facilitators Hotel Room/Expenses	$600
Clerical Support to assist training manager in creating Program- (20 hrs @ $10 per hr.)	$200
External Consultant Fees associated with reviewing Training Program created by training manager	$800
Photocopying costs to produce brochure for all employees with training information sent out prior to training.	$200
Administrative support to prepare attendee lists/schedules for training dates ( 10 hrs. @ $12 per hour)	$120
Cost to purchase new LCD projector for training department to share as old one no longer works	$2000

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.