Cost-benefit analysis

This solution evaluation process will be used to determine the potential success of your implemented solution. Success can be measured using both qualitative and quantitative methods, therefore it is important to determine which tools and metrics you will use to evaluate the data you have collected.

In this assignment, you will use cost-benefit analysis to evaluate the financial outcomes of your solution. Create a data chart or graph to most effectively display the cost-benefit evaluation metrics that you will use to measure the success of your solution. Review the study material “Cost Benefit Analysis Solution Evaluation” Excel spreadsheet to assist you. Then, write 250-word explanation of the degree of confidence you have regarding the cost-benefit analysis and the assumptions you are required to make for cost, risk, benefits, and the financial outcome of your proposed solution. Include an explanation of how you will measure whether the solution is successful in addressing the problem and meeting the needs of the business, employees, and customers.

2

>Descriptors

period – the period of time, expressed in months, that a project requires to recover the money invested in it (including the one-time savings which are often excluded by some calculators)

– an indicator that is often used to decide whether the benefits of a given project or solution outweigh the actual costs (the higher the ratio the better the investment)

Definitions:

Payback

Benefit-cost ratio

Analysis horizon – the number of months the project is expected to be utilized before replacement or major upgrade

Implementation costs include capital costs (equipment, constructions, etc.), training, travel, outside professionals, lost of productivity during implementation & training, implementation costs such as installation, etc.

Ongoing costs include maintenance costs (monthly costs relating to the ongoing maintenance) and operational cost (internal labor, expendables, materials, supplies, etc.)

Hard savings – the direct benefits that affect the bottom line and can directly improve the financial performance of the organization (examples are: sales/price increase, cost reduction and productivity savings)

Soft savings – the indirect benefits which are difficult measure (they are mainly improved yield of a business process, the increased stakeholder satisfaction and the increased safety in the workplace)

One-time savings – examples are value of inventory reduction and sale of unneeded assets

Example

, hours, units

$

/partial year

00

1

8,000

2

3

0

1

2

3

4

6

1

0

2

QC 500 200

3

1 4
2

0

3 1
4 2
5 3
6 4
7

Benefit-cost ratio

0 6.7 1,200

Call Center
		$		E.g.: $/unit	Year- Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper										1		Year-2	Year-										3
	Cost/Benefit		Unit		Entry/Quantity		Final/Total		Description
Project Title		C O S T S		Implementation costs (one time)		8,							0
CRM Rules for CCR Quality	Update rules in CRM	Cost to update rules
	Solution Title/Description
	Sponsor
									4
	CC Manager		Ongoing costs (monthly)
	Project Manager
	J Doe
	Timeframe for CBA (in months)
12
	Estimated cost/savings year one (maximum 12)		>>>Total Costs (monthly)			6		7	3,333	11,333	19,333
			5		B E N E F I T S		Hard and soft savings (monthly)	1,	200
	Average labor cost (hourly / daily)	Saving from reduced calls	Calls			500	1,000
$23.00	Saving from reduced	QC
	Assumptions/Comments
	Savings (one time)
	>>>Total benefits (monthly)		1,200	6,000	20,400	34,800
1.80	667		Monthly payback		Net cash flow		Net gains	2,667	9,067	15,467
	Monthly payback period		6.7		ROI	80.0%

Cost Benefit Analysis

E.g.: $/unit $

Year-2

Cost/Benefit Unit Entry/Quantity Final/Total Description

C
O
S
T
S Implementation costs (one time)

1
Solution Title/Description 2
3
Sponsor 4
CC Manager Ongoing costs (monthly) 0

Project Manager 1

J Doe 2
Timeframe for CBA (in months) 3
4

Estimated cost/savings year one (maximum 12) >>>Total Costs (monthly)
5 B
E
N
E
F
I
T
S Hard and soft savings (monthly) 0
Average labor cost (hourly / daily) 1

2 500

Assumptions/Comments 3
1 4
2 Savings (one time) 0
3 1
4 2
5 3
6 4

7 >>>Total benefits (monthly)
Benefit-cost ratio Monthly payback Net cash flow Net gains
Monthly payback period 0 ROI

$, hours, units	Year-1/partial year	Year-3
Project Title
5000