Question

QUESTION 1 of 10: You believe that offering a training class will improve worker productivity by 20%. Currently each worker produce

$60,000 worth of goods that you sell at 50% gross margin. The training costs $2,000 per employee. Is the training worth it?
a) Yes
b) No

Answer 1

Yes

Step-by-step explanation:

To determine if the training is worth it, we need to compare the cost of the training with the additional revenue generated by the increase in productivity.Currently, each worker produces $60,000 worth of goods, resulting in $30,000 of gross margin per worker (50% of $60,000). If productivity increases by 20%, each worker would produce $72,000 worth of goods, resulting in $36,000 of gross margin per worker (50% of $72,000).The cost of the training per employee is $2,000. Therefore, the additional gross margin per employee as a result of the training is $6,000 ($36,000 - $30,000).To break even on the cost of the training, we need to find out how many additional units each employee would need to produce to cover the $2,000 cost of training. This would be calculated as follows:$2,000 ÷ 50% = $4,000 (additional units needed to generate $2,000 of gross margin at 50% margin rate)$6,000 ÷ $4,000 = 1.5 (additional units per employee needed to cover the cost of training)Since each worker is expected to increase productivity by 20%, which is greater than the 1.5 additional units needed to cover the cost of training, the training is worth it.Therefore, the answer is: a) Yes