(CBA)

 Cost–benefit analysis (CBA), sometimes

called benefit–cost analysis (BCA), is a
systematic approach to estimating the
strengths and weaknesses of alternatives
that satisfy transactions, activities or
functional requirements for a business.
 It is a technique that is used to determine
options that provide the best approach for
the adoption and practice in terms of benefits
in labor, time and cost savings etc.
 The CBA is also defined as a systematic
process for calculating and comparing
benefits and costs of a project.
 Performing an analysis.

1) Brainstorm Costs and Benefits.

2) Assign a monetary value to the costs.
3) Assign a monetary value to the benefits.
4) Compare costs and benefits.
 Example

Custom graphic works has been operating for

just over one year. Sales are exceeding
targets considerably.
Currently, 2 designers are working full time,
and the owner is considering increasing
capacity to meet demand.
This would involve leasing more space and
hiring 2 new designers.

The owner decides to compete a cost-benefit

analysis to get the figures and compare the
costs.
 Costs
Category Details Cost in first year
Lease 750 sg feet at 86.6 Dhs per sq 65,000 Dhs.
foot.
Lease improvements Knock walls , re-configure 75,000 Dhs
office space.
Hire 2 designers. Salary inc benefits. 375,000 Dhs
Recruitment costs. 55,000 Dhs
Training. 15,000 Dhs

2 additional workstations Furniture and hardware. 30,000 Dhs

Software license. 5,000 Dhs
Construction downtime. 2 weeks at 37,500 per week. 75,000 Dhs
Total 900,000 Dhs
 Benefits
Benefits Benefits within 12 months

50 % Revenue increase. 985,000 Dhs

Paying in-house designers 75 Dhs per hour 210,000 Dhs

versus outsourcing at 250 Dhs per hour.

10% improvement productivity per 295,000 Dhs

designer.

Improved customer service and retention 50,000 Dhs

as a result of 100% in-house design.

Total. 1,540,000 Dhs

 Results

Cost = 900,000 Dhs

Benefit = 1,540,000 Dhs

= 640,000 Dhs