CASE STUDIES 447
Table A3.3 Holly Road Farm Produce
Total costs
Agricultural specialists 60 @ £15,000 p.a. 900,000
Unskilled labourers 35 @ £9,000 p.a. 315,000
Clerical staff 5 @ £7,000 p.a. 35,000
Total salaries 1,250,000
Oncosts 10% 125,000
Total salary and related costs 1,375,000Table A3.4 Holly Road Farm Produce
Redundancy Cost savings
40 employeesContinuing costs
60 employeesAgricultural specialists 40% of 60 @ £15,000 p.a.= 24 360,000 540,000
Unskilled labourers 40% of 35 @ £9,000 p.a.= 14 126,000 189,000
Clerical staff 40% of 5 @ £7,000 p.a.= 2 14,000 21,000
Total salaries 500,000 750,000
Oncosts 10% 50,000 75,000
Salary and related costs 550,000 825,000
Less: Redundancy costs Three months’ pay (500/4) −125,000
Less: Retraining costs 24 @ £7,500 −180,000
Actual cost savings 245,000
redundancy costs will incur three months’ salary and no oncosts are applicable to
redundancy payments. At the end of the year the company will have to retrain its
new agricultural specialists at a cost of £7,500 each.
Holly Road’s advisers have produced the following information (Table A3.4)
to justify their redundancy recommendations, resulting in a net cost saving of
£245,000 for the 12-month period when the farm is being changed to support
organic crops.
The manager has asked for your comments.
This question particularly relates to an understanding of Chapter 10.
Case study 4: Call Centre Services PLC
Call Centre Services (CCS) operates two divisions: a call centre that answers
incoming customer service calls on behalf of its clients; and a telemarketing
operation that makes outgoing sales calls to seek new business for its clients. In
the call centre, each operator can handle on average about 6,000 calls per annum.
Although staff are allocated to one division or the other, when there is a
high volume of incoming calls sales staff from the telemarketing division assist
customer service staff in the call centre division. This is the result of a recruitment
‘freeze’ being in place.
The finance department has produced the information shown in Table A3.5.