The company uses a job cost system and has specialized labour for its jobs. The Human Resources department has done a great job recruiting talent for each job but there is a lot of competition for this labour. The forecast above is the best guess of what it will cost to attract and retain talent. This is reflected in the labour cost line. Some jobs are new to the company and the training budget will also be important. Sales in 2021, in particular, are very highly dependent on well-trained labour.

In 2020, a new president of the company is named and believes the 3.75% net income as a percentage of sales is too low. He wants to cut your labour budget. He in particular, wants to cut the training budget, which is in labour costs.

How would you explain to the new president the benefits of staying with the budget of $105,000 in 2020?