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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anijesuajayi anijesuajayi · Answer 1 · 2020-01-25T07:32:20+01:00

Answer:

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%