About eight years ago, North Shore Racquet Company faced the problem of rapidly increasing costs associated with workplace accidents. The costs included the following:
Insurance premiums...................................$100,000
Average cost per injury.................................$1,500
Number of injuries per year.................................15
Number of serious injuries....................................4
Number of workdays lost....................................30
A safety program was implemented with the following features: hiring a safety director, new employee orientation, stretching required four times a day, and systematic monitoring of adherence to the program by directors and supervisors. A year later, the indicators were as follows:
Insurance premiums.....................................$50,000
Average cost per injury.....................................$ 50
Number of injuries per year...................................10
Number of serious injuries......................................0
Number of workdays lost.......................................0
Safety director's starting salary........................$60,000
Required:
1. Discuss the safety-related costs listed. Are they variable or fixed with respect to units produced? With respect to other independent variables (describe)?
2. Did the safety program pay for itself? Discuss your reasoning.