CPHR Financial Analysis and Reporting 3 — Questions and Answers
Question 1: HR is analyzing turnover costs. If replacing an exempt employee costs approximately 50–200% of annual salary, and the average salary is $80,000, what is the low-end replacement cost estimate?
- $8,000
- $40,000 (Correct answer)
- $80,000
- $160,000
Correct answer: $40,000
50% of $80,000 = $40,000 as the low-end estimate for replacing an exempt employee.
Question 2: What is the primary purpose of a workforce planning financial model?
- To calculate payroll taxes owed
- To project future labor costs aligned with business forecasts (Correct answer)
- To determine employee benefit election rates
- To measure training program attendance
Correct answer: To project future labor costs aligned with business forecasts
Workforce planning financial models link headcount and skill projections to cost forecasts, ensuring labor supply aligns with business strategy.
Question 3: Which of the following is an example of a fixed labor cost?
- Overtime pay
- Commission payments
- Salaried employee compensation (Correct answer)
- Seasonal temporary worker wages
Correct answer: Salaried employee compensation
Salaried compensation remains constant regardless of business volume, making it a fixed cost for budgeting purposes.
Question 4: An HR department calculates its ROI on a leadership development program. Training cost $200,000 and the measured productivity gain was $320,000. What is the ROI?
- 37.5%
- 60% (Correct answer)
- 80%
- 160%
Correct answer: 60%
ROI = (Net Benefit ÷ Cost) × 100 = ($120,000 ÷ $200,000) × 100 = 60%.
Question 5: What does 'accrual basis accounting' mean in the context of HR expense reporting?
- Expenses are recorded only when cash is paid
- Expenses are recorded when incurred, regardless of when cash is paid (Correct answer)
- Only payroll expenses are tracked in real time
- Benefits are expensed at year-end only
Correct answer: Expenses are recorded when incurred, regardless of when cash is paid
Accrual accounting matches expenses to the period in which they are incurred, not when the cash payment is made.
Question 6: Which metric best helps HR quantify the financial impact of absenteeism?
- Headcount ratio
- Cost of absenteeism per employee (Correct answer)
- Benefit utilization rate
- Span of control ratio
Correct answer: Cost of absenteeism per employee
Cost of absenteeism per employee captures lost productivity, replacement costs, and administrative expenses attributable to unplanned absences.
Question 7: In a cost-benefit analysis of an HR initiative, which item belongs in the 'benefits' column?
- Consultant fees
- Reduced voluntary turnover savings (Correct answer)
- Software licensing costs
- Training material expenses
Correct answer: Reduced voluntary turnover savings
Reduced turnover represents a financial benefit (avoided replacement costs), while fees, licensing, and training materials are costs.
CPHR Financial Analysis and Reporting 3
HR is analyzing turnover costs.
If replacing an exempt employee costs approximately 50–200% of annual salary, and the average salary is $80,000, what is the low-end replacement cost estimate?