Question

Assume Digby Corp. is downsizing the size of their workforce by 10% (to the nearest person) next year from various strategic initiatives. Digby is planning to conduct exit interviews to learn more about how they can improve in processes and increase productivity. The exit interviews are estimated to cost $100 per employee in addition to normal separation costs of $5000. How much will the company pay in separation costs if these exit interviews are implemented next year?

(A) $120,330
(B) $292,230
(C) $1,082,970
(D) $2,630,070

HUMAN RESOURCES SUMMARY
Andrews Baldwin Chester Digby
Needed Complement 333 682 383 573
Complement 333 682 383 573
1st Shift Complement 333 409 254 375
2nd Shift Complement 0 273 129 199
Overtime% 0.0% 0.0% 0.0% 0.0%
Turnover Rate 6.6% 10.0% 7.9% 5.9%
New Employees 22 106 30 34
Separated Employees 32 0 185 100
Recruiting Spend $5,000 $0 $2,500 $5,000
Training Hours 80 0 40 80
Productivity Index 117.8% 100.0% 116.6% 129.3%
Recruiting Cost $131 $106 $106 $205
Separation Cost $160 $0 $925 $499
Training Cost $533 $0 $307 $917
Total HR Admin Cost $824 $106 $1,338 $1,620
Labor Contract Next Year
Wages $31.04 $31.04 $31.04 $31.04
Benefits 2,500 2,500 2,500 2,500
Profit Sharing 2.0% 2.0% 2.0% 2.0%
Annual Raise 5.0% 5.0% 5.0% 5.0%

Answer 1

Digby Corp's total separation costs after downsizing by 10% with the inclusion of exit interviews will be $290,700. This is calculated by taking the downsized number of employees (57) and multiplying it by the sum of normal separation costs and the exit interview cost per employee ($5100).

Step-by-step explanation:

Calculating the separation costs for Digby Corp due to downsizing requires taking into account both the normal separation costs and the additional costs associated with conducting exit interviews. As the company plans to reduce its workforce by 10% and based on the Human Resources Summary provided, Digby currently has 573 employees. Reducing this number by 10% leads to approximately 57 separated employees (rounding to the nearest person).

To find the total separation cost, we multiply the number of separated employees by the sum of the normal separation cost and the additional exit interview cost. The normal separation cost is $5000 and the exit interview cost is an additional $100 per employee. Thus, for each employee, the total cost is $5100 ($5000 + $100).

The calculation would be:
57 employees × $5100/employee = $290,700

Therefore, the correct answer is the total amount Digby Corp will pay in separation costs, which is $290,700.