1. What figure will Cal Jenson report to Fred Donofrio for the amount that absenteeism cost ONO last year?

ONO Inc. is an auto-supply company with 11 employees. In addition, there are two supervisors and Fred Donofrio, the owner and general manager. Last year, ONO did $5 million in business and earned $250,000 in profits ($375,000 before taxes). The autosupply business is extremely competitive, and owners must constantly be on the lookout for ways to reduce costs to remain profitable.

Employee salaries at ONO average $21.00 an hour, and benefits add another 33 percent to these labor costs. The two supervisors earn an average of $28.00 an hour, with a similar level (percentage) of benefits. Employees receive two weeks of vacation each year and 12 days of paid sick leave.

Over the last two years, Fred Donofrio has noted an increasing rate of absenteeism among his 11 employees. (There seems to be no similar problem with the two supervisors.)

Last week, he asked Cal Jenson, his most senior supervisor, to go through the records from last year and determine how much absenteeism had cost ONO. Further, he asked Cal to make any recommendations to him that seemed appropriate depending on the magnitude of the problem.

Cal determined that ONO lost a total of 539 employee labor-hours (67.375 days) to absenteeism last year. (This figure did not, of course, include vacation time.) Further, he estimated that he and the other supervisor together averaged 1.5 hours in lost time whenever an employee was absent for a day. This time was spent dealing with the extra problems (rescheduling work, filling in for missing workers, etc.) that an absence created.

On several occasions last year, ONO was so short of help that temporary workers had to be hired or present employees had to work overtime. Cal determined that the additional costs of overtime and outside help last year totaled $3,100. Cal is now in the process of preparing his report to Fred Donofrio.