Question

Calculate the ROI after the first year of training for companies in Ontario who participated in the security guard training program.

The security guard training program has proven to be a success over the years. For example, it is estimated that in the first year that the training program was rolled out in Ontario, payouts to families of civilians killed accidentally by security guards declined from $1,000,000 to $225,000. Cumulative costs of administering the training program for these companies includedfacilities rental of ($3,000), trainer salaries ($35,000), materials ($1,000) and administrative support ($3,500). Employee salary opportunity costs were calculated at $25 per hour for 1,000 security guards who were trained in the province.

Answer 1

Solution:-

Return on investment (ROI)= (Benefits from investment / Investment amount)*100

In the given case, the following is available:

Benefits from investment= Reduction in payouts= $1,000,000-$225,000= $7,75,000

Investment amount= Facilities rental + Trainer salaries + materials + administrative support + Opportunity costs = 3,000 + 35,000 + 1,000 + 3,500 + (25*1000)= $67,500

ROI= 7,75,000/67,500 = 1,148%

Note: In the absence of specific number related to hours of training, we must assume it to be one hour per security guard. Hence, the opportunity cost becomes $25*1000= $25,000.