Professional Documents
Culture Documents
Cost and Benefit Analysis
Cost and Benefit Analysis
Cost and Benefit Analysis
ANALYSIS
Cost and Benefit Analysis
For an individual
They might rely on intuition, a “gut feel” for the right choice. They decide to do
an analysis of the choices or it may be a combination of both of these.
For a company
Being concerned with the profit earning capacity and income flow, they may
undertake a cash flow analysis or a full financial appraisal of the project.
For the Government
Decision making for governments is much harder. Not only are they
expected to consider the profitability (or at least neutrality) of the
costing but must also include consideration of the social cost and benefits
of their choices. They are also expected to act within the political
environment to satisfy the political agenda set by the government of the
day and finally, must also comply with environmental considerations.
4
Cost – Benef it
Analysis
Other issues
Is the project worthwhile
financially?
Is it the best option?
Should it be undertaken at all?
5
Process of Cost – Benefit
Analysis
: -
CBA is a process that presents a picture of various costs
& benefits associated
Identification of with an information
Evaluation of system. Choice of System
costs & benefits
CBA as a process consists ofcosts & benefits 3 basic
activities viz.
1 . Identification of Costs & Benefits :
Identify the costs & benefits associated with a
task/ operation, or investment project.
2. Evaluation of costs ( tangible, intangible, fixed,
variable, direct, & indirect) & benefits associated with
each task/operation/investment project.
16
Uneven distribution of benefit to the community.
Time Problems
Tackling future time problems by discounting future costs
and benefits.
Calculating the correct rate for future rupees value as well as
accounting for additional benefits and costs associated.