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28 September, 12:17

Acme Global sent 100 workers to training to decrease defects on the assembly line. In the past year, there have been 2,000 defective products created at a cost of $100 each. In the year following training, only 1,000 defective products were created. Training costs $100 per worker.

What is the ROI on the training?

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  1. 28 September, 12:37
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    The Return On Investment (ROI) is 1000%

    Explanation:

    First, we calculate the cost of previous year defects

    = Cost per defective product x The number of products that are defective

    Previous Year Defect Costs = $100 x 2000 = $200,000

    Secondly, we calculate the cost of defects after training took place

    = Cost per defective product x defects (1000)

    = $100 x 1000 = $100,000

    After training therefore, the savings in defect costs will be

    $200,000 - $100,000 = $100,000

    Thirdly, we calculate the cost of training

    = Cost of training per worker x number of workers

    = $100 x 100 workers = $10,000

    Finally, calculate the Return on Investment in percentage

    = (The Savings in cost of defects / cost incurred to train the works) x100

    = ($100,000/$10,000) = 1000%

    The Return on Investment is 1000%
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