Costing Report

Cost Accounting Report
Implementing E-Learning v/s Instructor

led training
Sr. Name Roll No.
No.
1 Nikunja Rout 39
2 Pankaj Goyal 40
3 Sandeep Gupta 49
4 Shiv Shakti Garg 52
5 Shivam Maurya 53
6 Vivek Gupta 63
November 10 EMP-OCT-08 1 of 22
ACKNOWLEDGEMENTS
We would like to sincerely thank Prof. Jain for her constant support and
guidance throughout the course in Cost Management. She helped us
develop a strong fundamental base in Cost Management. These
fundamentals have gone a long way in helping us to do this project.
We wish to express our gratitude for the invaluable time she gave us
and the patience with which she dealt with our queries about the
project.
PREFACE
In today’s new economy, corporations are increasingly facing new

challenges. Escalating competition in a globalize market, shrinking
corporate resources, maturing markets, rapid shifts in technology, and
the recruitment and retention of talented and skilled people are just a
few of these challenges.
In addition corporations are constricted by the need to show higher

profitability at lower costs. Training costs which corporations incur is
seen as necessary expense. More and more emphasis is being placed
on cutting the expense of training by making it more efficient.
This report looks at implementing an e-learning based induction

training and helps the corporation’s HR department to make a decision
on whether to switch to e-learning based induction over traditional
instructor led training. The breakeven analysis is used to help
corporation make that decision.
CONTENTS
1 INTRODUCTION......................................................................................................................................5
1.1 CONTEXT..............................................................................................................................................5
1.2 TRAINING APPROACHES..................................................................................................................5
1.2.1 E-LEARNING .................................................................................................................................5
1.2.2 INSTRUCTOR LED TRAINING (ILT)............................................................................................6
1.3 FACTORS FOR COMPARING ILT AND E-LEARNING............................................................................................7
2 COST ANALYSIS....................................................................................................................................10
2.1 INSTRUCTOR LED TRAINING........................................................................................................11
2.1.1 COST COMPONENTS..................................................................................................................11
2.1.2 Fixed direct costs .........................................................................................................................11
2.1.2.1 Create Course material...........................................................................................................................12
2.1.2.2 Train the Trainer....................................................................................................................................12
2.1.3 Variable direct costs ....................................................................................................................13
2.1.3.1 Facilities Fees........................................................................................................................................14
2.1.3.2 Trainer days...........................................................................................................................................14
2.1.3.3 Travel costs............................................................................................................................................14
2.1.3.4 Student Costs.........................................................................................................................................14
2.1.3.5 Course Material.....................................................................................................................................14
2.1.4 Overhead costs .............................................................................................................................15
2.1.4.1 Maintaining the training material...........................................................................................................15
2.1.4.2 Organizing and status reporting.............................................................................................................15
2.2 E-LEARNING......................................................................................................................................16
2.2.1 COST COMPONENTS..................................................................................................................16
2.2.2 Fixed direct costs .........................................................................................................................16
2.2.2.1 Create Course material...........................................................................................................................17
2.2.2.2 E-learning site development...................................................................................................................17
2.2.2.3 E-learning site setup..............................................................................................................................17
2.2.3 Variable direct costs ....................................................................................................................18
2.2.3.1 Student Costs.........................................................................................................................................18
2.2.4 Overhead costs .............................................................................................................................18
2.2.4.1 Fixed overheads for E-learning..............................................................................................................19
2.2.4.2 Variable overheads for E-learning.........................................................................................................19
3 BREAKEVEN ANALYSIS......................................................................................................................20
4 CONCLUSION.........................................................................................................................................22
1 INTRODUCTION
1.1 CONTEXT
XYZ Corporation, an IT company recruits over 1000 engineers every
year. Due to complex organization structures and processes, XYZ
wants to start a week long induction program for new engineers.
Of the many factors that come into play when determining the proper
training delivery approach—efficiency, timeliness, consistency, and
appropriateness of delivery method—the key driver is typically
program cost. Program cost, which includes among other factors, the
cost of initial development, instructor’s time, material, travel, and
opportunity cost of the learner, can vary widely for similar programs
depending on the delivery method.
The induction program like any training program involves high costs
direct and indirect, fixed and variable. Due to high costs company
wants to compare various options that give highest benefit at lowest
cost.
1.2 TRAINING APPROACHES

1.2.1 E-LEARNING
E-Learning is a type of Technology supported education/learning (TSL)
where the medium of instruction is computer technology, particularly
involving digital technologies. E-learning has been defined as
"pedagogy empowered by digital technology". In some instances, no
in-person interaction takes place.
E-learning is used interchangeably in a wide variety of contexts. In

companies, it refers to the strategies that use the company network to
deliver training courses to employees. In USA, it is defined as a
planned teaching/learning experience that uses a wide spectrum of
technologies, mainly Internet or computer-based, to reach learners.
Lately in most Universities, e-learning is used to define a specific mode
to attend a course of study where the students rarely, if ever, attend
face-to-face for on-campus access to educational facilities, because
they study online.
E-Learning can provide for major benefits for the organizations and
individuals involved.
o Reducing environmental impact: E-Learning allows people to
avoid travel, thus reducing the overall carbon output. The fact
that it takes place in a virtual environment also allows some
reduction of paper usage. With virtual notes instead of paper
notes and online assessments instead of paper assessments, E-
Learning is a more environmentally friendly solution
o Quality education, made affordable: The fact that instructors of

the highest caliber can share their knowledge across borders
allows students to attend courses across physical, political, and
economic boundaries. Recognized experts have the opportunity
of making information available internationally, to anyone
interested at minimum costs. This can drastically reduce the
costs of higher education, making it much more affordable and
accessible to the masses. An internet connection, a computer,
and a projector would allow an entire classroom in a third world
university to benefit from the knowledge of an opinion leader
o Convenience and flexibility to learners: in many contexts, E-

Learning is self-paced and the learning sessions are available
24x7. Learners are not bound to a specific day/time to physically
attend classes. They can also pause learning sessions at their
convenience
1.2.2 INSTRUCTOR LED TRAINING (ILT)

Instructor led training is traditional way of learning where all trainees
assemble in a training room and trainer gives the training . The ILT
training main benefits are:
o Instructor Led Training is considered by all to be the most

effective, as it best facilitates real-time interaction, in-depth
information sharing and direct response to questions
o Few educational opportunities are considered more valuable

than meeting and interfacing directly with an instructor, staff
support for various programs, and other students
However high costs associated with dedicated training time , can be

deterrent
1.3 Factors for comparing ILT and E-Learning
1. Interface
This is interface with the trainee. In ILT an instructor imparts the

training while in E-Learning it is computer which interacts with the
student.
2. Effectiveness
The understanding or learning by a student is higher in ILT as

compared to a student in E-Learning.
3. Efficiency
Efficiency is defined as “gained knowledge or skills” divided by “all

information delivered.” If only 15 minutes of a one-hour class is
relevant, the class is 25 percent efficient because the learner has to sit
through 45 minutes of unnecessary material. If an e-learner is able to
skip 45 minutes of material, or pass a pre-assessment test, allowing
them to focus exclusively on the 15 minutes of new material, the
efficiency of the online class would equal 100 percent
4. Timeliness
Timeliness refers to the immediacy of the instruction. Namely, how

relevant is it to the task at hand. Instructor-led training has been
referred to as training that is delivered just-in-case while e-learning is
delivered just-in-time. Instructor-led training requires the coordinated
scheduling of the instructor, facilities, and students at some future
date. E-learning, on the other hand, can be delivered anytime it is
convenient for the learner.
5. Consistency
One of the e-learning advantages is consistency, or the ability to

deliver the same message every time. This can be especially important
for such topics as government regulation.
6. Pace
All students have different requirements for the pace at which training
has to be conducted. In ILT the training has to be conducted at the
pace of the slowest learner. In e-learning the pace is dictated by the
student.
7. Ease of Updating
Because e-learning material typically is delivered from a central

database, it enjoys the flexibility of being easily updated. New material
can be added, old material can be updated, and mistakes corrected in
a single location.
8. Scaling Up
As the number of students required to be trained increases the

logistics requirements for ILT increases manifold. The whole exercise
will have to be completed in months. In case of E-Learning the training
can be provided to any number of students.
9. Program Cost
The most important comparison for any delivery approach is the

program cost.
Parameter ILT E-Learning
Interface Human Computer
Effectiveness High Medium
Efficiency Low High
Timeliness Low High
Consistency Low High
Pace Instructor driven Self paced
Ease of updating Low High
Scaling up Low High
Program cost High Low
Table 1: Comparing ILT and E-learning
Due to the reason that program cost is viewed as most
important factor , for comparing the 2 options only program
cost is considered .
2 COST ANALYSIS
For accurate cost analysis the following parameter were set by
company’s HR department based on which cost analysis is done to
reach the management decision.
1. Life Span of Course
A training course on induction program could in theory be used for

many years. The course could be re-used for number of years with
some modifications done on yearly, so it will be assumed that the
course will only have a useful life of five years.
2. Total Number of Students
XYZ currently recruits on an average 1000 engineers, all of whom will

be required to take the course in the first year of delivery.
3. Student Learning Time
After examining required learning outcomes and associated behavioral

objectives, it was determined that this course could be delivered as a
five-day course. Assuming that actual classroom time is only eight
hours each day, the total learning time for the course would be 40
hours.
4. Burdened Compensation for Subject Experts
XYZ’s subject matter experts are paid on average Rs 18,75,000 per

year. This annual cost is then divided by the total number of
productive workdays, 250, to get the cost per instructor day. In other
words, Rs 18,75,000 compensation/250 workdays = Rs 7500 per day.
5. Burdened Compensation for Instructor
XYZ’s instructors are paid on average Rs 12,50,000 per year. This

annual cost is then divided by the total number of productive
workdays, 250, to get the cost per instructor day. In other words, Rs
12,50,000 compensation/250 workdays = Rs 5000 per day.
6. Burdened Compensation for Student
XYZ’s new hires are typically paid on average Rs 8,75,000per year.

This annual cost is then divided by the total number of productive
workdays, 250, to get the cost per student day. In other words, Rs
8,75,000/250 = Rs 3500 per day.
Item Assumptions
Life span of course 5 years
Total number of students 1000 / year
Student learning time in class room 40 hours (5 days)
Compensation for subject matter expert Rs 7500 per day
Compensation for instructor Rs 5000 per day
Compensation for student Rs 3500 per day
Table 2: Main parameters used for costing
2.1 INSTRUCTOR LED TRAINING

2.1.1 COST COMPONENTS
The cost components for ILT training are divided into 3 main
components:
o Fixed direct costs

o Variable direct costs
o Overheads (fixed and variable)
2.1.2 Fixed direct costs
Table 3 gives an overview of fixed cost components considered for

instructor led training.
Item Cost Components Cost Type
Course Material Create reading material Fixed Direct
Create presentation Costs
Create exercises
Review and Approve
Train the Trainer (10Facilities Fixed Direct

Students) Trainer days Costs
Student days (10 Students)
Course material
Table 3: Fixed components for ILT
2.1.2.1Create Course material
To determine the cost of developing instructor-led training , XYZ

considered the past experience to come up with estimated time taken
to prepare the courseware for this training . The courseware consisted
of:
o Creating Reading Material

o Creating Powerpoint Presentation
o Creating exercises
o Review of Material and approval
Estimated hours required for creating the training material are 40 days
. So the total cost needed for preparation of creating courseware for
ILT is 40*7500 = Rs 3,75,000
2.1.2.2 Train the Trainer
XYZ plans to use its own training managers to deliver the course in a
workshop format. However, the subject matter experts will need to
conduct a train-the-trainer session in which XYZ’s training instructors
are themselves taught the content, given a chance to practice
facilitation techniques, and review the daily course schedule.
XYZ is budgeting that 10 trainers be required to be trained on the

course . Table 4 shows the breakup of costs for train the trainer . The
facilities rent for 5 days at rate of Rs 10,000 per day is charged.
Including the subject matter expert cost and trainer’s cost , the total
cost for training the trainers is Rs 3,92,500.
Item Setup & Development - Fixed Costs (Rs.)

Course Create reading material 15 7,500 1,12,500
Material
Create presentation 15 7,500 1,12,500
Create exercises 10 7,500 75,000
Review and Approve 10 7,500 75,000
Train theFacilities (5 Days) 5 10,000 50,000
Trainer
Trainer days (5 Days X 1) 5 7,500 37,500
Student days (5 Days X 10) 50 5,000 2,50,000
Course Material 10 5,500 55,000
Total Fixed Costs 7,67,500
Total Fixed Cost (p.a.) 1,53,500
Table 4: Fixed components for ILT
2.1.3 Variable direct costs
Table 5 gives an overview of variable cost components considered for

instructor led training.
Training (15Facilities Variable Direct

Students) Trainer days Costs
Travel costs
Student days (15 Students)
Course material
Table 5: Variable cost components for ILT
2.1.3.1Facilities Fees
The proportionate rent charged on company’s conference room for 5

days at rate of Rs 10,000 per day is Rs 50,000 . This rent is directly
charged to training cost center.
2.1.3.2Trainer days
This number is calculated by multiplying the number of days required

to deliver each workshop by the compensation rate of the instructor.
So for 5 day course at rate of Rs 5000 per day , the cost is Rs 25,000.
2.1.3.3 Travel costs
Instructors will need to travel to site where students are located .

Hence cost for travel , hotel and meals is estimated to be Rs 18,000
per day . Hence total travel costs for instructor per session (of 5 days)
= Rs 90,000
2.1.3.4 Student Costs
Each session is assumed to contain 15 students. For 5 days, 75 student

days will be consumed. At rate of Rs 3500 per day of student rate, the
total student costs are estimated to be Rs 2, 25,000.
2.1.3.5 Course Material
XYZ is planning to provide each participant with a detailed student

manual. After consulting with a local print shop, it is determined that
each manual will cost Rs 500 to produce. Total costs for each training
materials will be 500 x 15 students = Rs 7,500 (per session)
Item Delivery Cost - Variable Costs (Rs.)

Student Cost Student days (15 Students) 75 3,000 2,25,000
Instructor Cost Trainer days 5 5,000 25,000

Travel 5 18,000 90,000
Training Location Proportionate Rent for5 10,000 50,000
Company’s Conference
room
Course Material Course Manual 15 500 7,500

Total 3,97,500
Table 6: Variable cost components for ILT
2.1.4 Overhead costs
Training Maintain training material, Plan andFixed Overheads

Department conduct training, Track and report training
status
Training Organize training, Report status Variable

Department Overheads
Table 7: Overhead cost components for ILT
2.1.4.1 Maintaining the training material
Training department will maintain the course material. The estimated

time for maintaining the training material is 5 days per year. Hence the
cost for course ware material is estimated to be Rs 25,000 (per year)
2.1.4.2 Organizing and status reporting
Training department will organize the training, book the conference

rooms and track the registration process. It will also collect feedback
forms and input them in status reports for department to track the
training effectiveness and suggestions for further improvement . This
cost is estimated to be 2 days per session at Rs 5000 per day .
Item Overhead Cost – Training Maintenance

Fixed (p.a.) Maintain training material, Plan and5 5,000 25,000
conduct training, Track and report
training status
Variable Organize training, Report status 2 5,000 10,000
Table 8: Overhead cost components for ILT
2.2 E-LEARNING
2.2.1 COST COMPONENTS
The cost components for ILT training are divided into 3 main
components:
o Fixed direct costs

o Variable direct costs
o Overheads (fixed and variable)
2.2.2 Fixed direct costs
Table 9 gives an overview of fixed cost components involved in

creating a e-learning course.

Course Material Create reading material Fixed Direct
Create e-learning content Costs
Create exercises
Upload course content
Review and Approve
E-Learning siteDesign web interface Fixed Direct

Development Design e-learning site costs
Development
Review and Approve
E-Learning site set-H/W Server Fixed Direct

up S/W costs
Set-up
Table 9: Fixed cost components for E-Learning
2.2.2.1Create Course material
To determine the cost of developing instructor-led training , XYZ

considered the past experience to come up with estimated time taken
to prepare the courseware for this training . The courseware consisted
of:
o Creating Reading Material

o Creating E-learning content & creating exercises
o Review of Material and approval
Estimated hours required for creating the training material are 70 days
Since creating a e-learning cost is more time consuming than the
instructor led course material, the costs are higher for creating e-
learning course material. So the total cost needed for preparation of
creating courseware for E-learning is 70*7500 = Rs 4, 75,000
2.2.2.2E-learning site development
An e-learning web site needs to be developed which the students can

access to have self-paced training. The design and development of the
web site is estimated to cost Rs 3, 75,000.
2.2.2.3 E-learning site setup
Hardware (server), software and setup costs will be incurred to host

the e-learning web site. These costs are estimated to be Rs 5,62,5000
Item Setup & Development - Fixed Costs (Rs.)

Course Material Create reading material 15 7,500 1,12,500
Create e-learning content 20 7,500 1,50,000
Create exercises 10 7,500 75,000
Upload course content 20 5000 1,00,000
E-Learning siteDesign look and feel 10 7,500 75,000
Development
Design e-learning site 15 7,500 1,12,500
Development 30 5,000 1,50,000
E-Learning SiteH/W Server 1 45,00,000 45,00,000
Set-up
S/W 1 5,00,000 5,00,000
Set-up 5 1,25,000 6,25,000
Total Fixed Costs 64,75,000
Total Fixed Cost (p.a.) 12,95,000
Table 10: Fixed cost components for E-Learning
2.2.3 Variable direct costs
Table 11 shows the variable direct costs incurred on e-learning based

training.

Training (15 Students) Student's Effort (80% of classroomVariable Direct
training time) Costs
Table 11: Variable cost components for E-Learning
2.2.3.1 Student Costs
With e-learning based training, the training is taken to the students (in
the form of Web access) rather than the students going to the training.
Thus, travel costs are eliminated. Additionally, instead of 75 days of
total student time(for 15 students) , it is estimated that 60 days be
required for e-learning because the training is self-paced and hence
efficiency can be gained because of this. Hence the student costs for
attending e-learning based training is Rs 1,80,000.
Item Delivery Cost - Variable Costs (Rs.)

Variable Costs Student's Effort (80% of60 3,000 1,80,000
classroom training time)
Table 12: Variable cost components for E-Learning
2.2.4 Overhead costs
Training support Report status Variable
Overheads
Site Maintenance Maintain Server Fixed

Content Maintenance Overheads
Content Upgrade
Help desk E-Learning support Fixed

Overheads
Table 13: Overhead cost components for E-Learning
2.2.4.1 Fixed overheads for E-learning
Fixed overheads for E-Learning based training include maintenance of

hardware server estimated to be 10% of cost of server per year.
Content Maintenance & upgrade will take an additional 18 days per
year . Setting up a help-desk in case students have problems is
estimated to be 30 days per year.
2.2.4.2 Variable overheads for E-learning
Variable overheads for E-Learning based training will include 0.5 hours
per session to report the completing status to respective departments.
Table 14 gives the detailed description of fixed and variable

overheads.
Item Overheads – Maintenance (Rs.)

Fixed Maintenance of Server 10% 4,50,000
Overheads
p.a. E-Learning Help Desk 30 5,000 1,50,000
Content Maintenance 8 5,000 40,000
Content Upgrade 10 5,000 50,000
Total 6,90,000
Variable Report status 0.5 5,000 2,500

Overheads
Table 14: Overhead cost components for E-Learning
3 BREAKEVEN ANALYSIS
Doing a simple cost savings analysis does not tell the whole story.
Because e-learning is typically more expensive to create initially than
instructor-led training, the payback often doesn't begin until year two
or three. Break-even analysis will identify at what exact point in time
the program begins to "save" money. The value of this measurement is
usually in terms of the number of students it will take to train in order
to reach break-even. To put break-even analysis simply, it answers the
question, "How many students will we have to train in order for our up-
front investment in technology-based e-learning training to begin to
pay-off."
Table 15 below summarizes the cost structure for instructor and e-

learning based training . The fixed costs are given per year and
variable costs are given per session of 15 students.
Break even point is calculated at appox. 120 students.
Item Instructor led (Rs.) E-learning (Rs.)
Fixed Cost (p.a.) 1,78,500 19,85,000
Direct Costs (p.a.) 1,53,500 12,95,000

Overheads (p.a.) 25,000 6,90,000
Variable Costs (VC) per batch 4,07,500 1,82,500
Direct Costs 3,97,500 1,80,000
Overheads 10,000 2,500
VC saving in e-learning 2,25,000
Difference in Fixed Cost 18,06,500
Breakeven Point (# of Batches) 18,06,500 / 2,25,000 = 8
Breakeven Point (# of Students) 8*15 = 120
Table 15: Breakeven analysis
Figure 1 shows the breakeven chart for ILT and E-learning training and
the chart shows that after 120 students are trained using e-learning
based training , XYZ company will break-even . If lesser than 120
students are trained per year , then instructor based training is more
beneficial .
Figure 1 : Breakeven chart
4 CONCLUSION
While the most obvious impact of e-learning on ROI is the significant

cost savings it can produce over traditional training, more significant
impact on ROI can be achieved as a consequence of e-learning. Well
constructed e-learning is not only faster and less expensive than
classroom training but also more effective. Numerous studies have
shown that people learn faster with multimedia training; they more
accurately recall what they learned over a longer period of time, and
they are better able to transfer what they learned to actual
performance.
Higher fixed costs which corporations will spend on creating a e-

learning courses will be offset by very low variable costs. The
breakeven analysis shown in this report demonstrates that fact and
hence it is recommended that XYZ makes a management decision to
adopt e-learning training for induction training.
END OF REPORT

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Cost Accounting Report

Implementing E-Learning v/s Instructor

In today’s new economy, corporations are increasingly facing new

In addition corporations are constricted by the need to show higher

This report looks at implementing an e-learning based induction

1.2 TRAINING APPROACHES

E-learning is used interchangeably in a wide variety of contexts. In

o Quality education, made affordable: The fact that instructors of

o Convenience and flexibility to learners: in many contexts, E-

1.2.2 INSTRUCTOR LED TRAINING (ILT)

o Instructor Led Training is considered by all to be the most

o Few educational opportunities are considered more valuable

However high costs associated with dedicated training time , can be

This is interface with the trainee. In ILT an instructor imparts the

The understanding or learning by a student is higher in ILT as

Efficiency is defined as “gained knowledge or skills” divided by “all

Timeliness refers to the immediacy of the instruction. Namely, how

One of the e-learning advantages is consistency, or the ability to

Because e-learning material typically is delivered from a central

As the number of students required to be trained increases the

The most important comparison for any delivery approach is the

Parameter ILT E-Learning

Interface Human Computer

Effectiveness High Medium

Efficiency Low High

Timeliness Low High

Consistency Low High

Pace Instructor driven Self paced

Ease of updating Low High

Scaling up Low High

Program cost High Low

Table 1: Comparing ILT and E-learning

1. Life Span of Course

A training course on induction program could in theory be used for

2. Total Number of Students

XYZ currently recruits on an average 1000 engineers, all of whom will

3. Student Learning Time

After examining required learning outcomes and associated behavioral

4. Burdened Compensation for Subject Experts

XYZ’s subject matter experts are paid on average Rs 18,75,000 per

5. Burdened Compensation for Instructor

XYZ’s instructors are paid on average Rs 12,50,000 per year. This

XYZ’s new hires are typically paid on average Rs 8,75,000per year.

2.1 INSTRUCTOR LED TRAINING

o Fixed direct costs

2.1.2 Fixed direct costs

Table 3 gives an overview of fixed cost components considered for

Train the Trainer (10Facilities Fixed Direct

Table 3: Fixed components for ILT

2.1.2.1Create Course material

To determine the cost of developing instructor-led training , XYZ

o Creating Reading Material

2.1.2.2 Train the Trainer

XYZ is budgeting that 10 trainers be required to be trained on the

Item Setup & Development - Fixed Costs (Rs.)

Table 4: Fixed components for ILT

2.1.3 Variable direct costs

Table 5 gives an overview of variable cost components considered for

Item Cost Components Cost Type

Training (15Facilities Variable Direct

Table 5: Variable cost components for ILT

The proportionate rent charged on company’s conference room for 5

This number is calculated by multiplying the number of days required