Cost and Benefit Essay

A cost emolument digest is done to determine how well, or how poorly, a mean action will turn out. Although a cost pull ahead analysis can be use for almost anything, it is most commonly done on financial questions. Since the cost benefit analysis relies on the addition of positive factors and the subtraction of negative ones to determine a lolly result, it is also known as running the numbers. A cost benefit analysis finds, quantifies, and adds tout ensemble the positive factors. These are the benefits. Then it identifies, quantifies, and subtracts all the negatives, the costs.The difference between the two indicates whether the planned action is advisable. The real trick to doing a cost benefit analysis well is making sure you include all the costs and all the benefits and properly quantify them. Should we use up an additional sales person or assign overtime? Is it a good judgement to purchase the new stamping machine? Will we be better off putting our free hard currency flow into securities rather than investing in additional large(p) equipment? Each of these questions can be answered by doing a proper cost benefit analysis.http//management.about.com/cs/money/a/CostBenefit.htmCost-Benefit psychoanalysisJules Dupuit, a French engineer, first introduced the concept of Cost-Benefit Analysis in the 1930s. It became popular in the 1950s as a truthful way of weighing up undertaking costs and benefits, to determine whether to go ahead with a bewilder. As its name suggests, Cost-Benefit Analysis involves adding up the benefits of a course of action, and then comparing these with the costs associated with it. The results of a cost-benefit analysis are often expressed as a payback stage this is the time it takes for benefits to repay costs. legion(predicate) people who use Cost-Benefit Analysis look for payback in less than a specific period for example, three years. You can use Cost-Benefit Analysis in a wide variety of situations. For example, whe n you are .Deciding whether to hire new team members..Evaluating a new project or change initiative..Determining the feasibility of a capital purchase.However, bear in mind that Cost-Benefit Analysis is best for making quick and simple financial decisions. much robust approaches are commonly used for more complex, business-critical or high cost decisions. http//www.mindtools.com/pages/article/newTED_08.htmBCA attempts to take prisoner all benefits and costs accruing to society from a project or course of action, regardless of which particular party realizes the benefits or costs, or the form these benefits and costs take. Used properly, BCA reveals the stintingally efficient investment alternative, i.e., the one that maximizes the net benefits to the public from an allocation of resources. BCA is not the same thing as financial analysis. Financial analysis is refer with how to fund a project over its lifespan and measures the adequacy of catamenia and future funds and revenues to ascertain the cost of building, operating, and maintaining the project. While financial analysis is an important part of project management, the economic merit of the project as measured by BCA is generally not affected by how the project is financed.Useful Applications of Benefit-Cost AnalysisBenefit-cost analysis (BCA) considers the changes in benefits and costs that would be caused by a potential improvement to the status quo facility. In highway decision-making, BCA may be used to help determine the following * Whether or not a project should be undertaken at all (i.e., whether the projects life-cycle benefits will exceed its costs). * When a project should be undertaken. BCA may reveal that the project does not pass economic muster now, barely would be worth pursuing 10 years from now due to projected regional traffic growth.If so, it would be prudent to take tempos now to preserve the future projects right-of-way. Which among many competing alternatives and projects shou ld be funded given a limited budget. BCA can be used to select from among design alternatives that yield diametric benefits (e.g., reconstruct a roadway with additional lanes versus no additional lanes) unrelated highway projects (a widened road versus an wear round on another road) and unrelated transportation projects in different transportation modes.The Benefit-Cost Analysis ProcessIn BCA, the analyst applies a discount rate to the benefits and costs incurred in each year of the projects life cycle. This exercise yields one or more alternative measures of a projects economic merit. The BCA process begins with the establishment of objectives for an improvement to a highway facility, such as reducing traffic congestion or improving safety. A clear statement of the objective(s) is essential to reduce the number of alternatives considered. The next step is to identify constraints (policy, legal, natural, or other) on potential agency options and specify assumptions about the futu re, such as judge regional traffic growth and vehicle mixes over the projected lifespan of the improvement. Having identified objectives and assumptions, the analyst (or analytic team) then develops a full set of reasonable improvement alternatives to meet the objectives.This process begins with the development of a do minimal option, known as the anchor case. The average case represents the continued operation of the current facility under good management practices but without major investments. Under these do minimal checks, the condition and performance of the base case would be expected to decline over time. Reasonable improvement alternatives to the base case can include a range of options, from major rehabilitation of the existing facility to full-depth reconstruction to replacement by a higher volume facility. Such alternatives will often involve construction, but alternatives that improve highway operations (such as the use of intelligent transportation systems) or man age break demand (such as incentives for off-peak travel) are suitable for consideration.Major Steps in the Benefit-Cost Analysis Process1. appoint objectives2. Identify constraints and specify assumptions3. fix base case and identify alternatives4. Set analysis period5. Define level of effort for screening alternatives6. Analyze traffic effects7. Estimate benefits and costs relative to base case8. Evaluate risk9. Compare net benefits and rank alternatives10. Make recommendationshttp//www.fhwa.dot.gov/infrastructure/asstmgmt/primer05.cfmThe Public consumption Code D. Standard Analytical Procedures Guide to economic appraisal Carrying out a cost benefit analysis http//publicspendingcode.per.gov.ie/wp-content/uploads/2012/08/D03-Guide-to-economic-appraisal-CBA-16-July.pdf