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 additional to normal separation costs of $5000.

How much will the company pay in separation costs if these exit interviews are implemented next year?

a) $199,920 b) $82,320 c) $1,799,280 d) $740,880

HUMAN RESOURCES SUMMARY
Andrews Baldwin Chester Digby
Needed Complement 350 565 690 392
Complement 350 565 690 392
1st Shift Complement 233 327 36 4 252
2nd Shift Complement 117 238 327 140
Overtime% 0.0% 0.0% 0.0% 0.0%
Turnover Rate 6.8% 6.0% 10.0% 7.9%
New Employees 24 34 113 31
Separated Employees 399 49 0 150
Recruiting Spend $2,600 $5,000 $0 $2,500
Training Hours 80 80 0 40
Productivity Index 113.7% 130.3% 100.0% 118.0%
Recruiting Cost $85 $203 $113 $109
Separation Cost $1,995 $244 $0 $749
Training Cost $560 $905 $0 $314
Total HR Admin Cost $2,640 $1,352 $113 $1,172
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%
Starting Negotiation Position
Wages
Benefits
Profit Sharing
Annual Raise
Ceiling Negotiation Position
Wages
Benefits
Profit Sharing
Annual Raise
Adjusted Labor Demands
Wages
Benefits
Profit Sharing
Annual Raise
Strike Days

Answer 1

$1799280

Step-by-step explanation:

EXISTING WORKFORCE = COMPLEMENT = 392 (SEE SECOND ROW, FOURTH COLUMN)

COMPANY WANT TO REDUCE THE SIZE BY 10%

SO NEW WORKFORCE = 392 -10% = 392-39.2 =352.8

SO TOTAL SEPARATION COST = NEW WORKFORCE X COST PER EMPLOYEE

TOTAL SEPARATION COST = 352.8 x (100 + 5000) =$1799280