Question

Hi,

I am requesting your help. I don’t understand this. I am hoping that you may be able to help. This course-related in Managerial Accounting, “Real-World”.

Thank you,

Michelle

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Instructions:

The concept of cost-benefit analysis considers both quantitative and qualitative cost and benefit measures to facilitate comparisons between alternatives for sound business decisions. Managers apply cost-benefit concepts when following the four decision-making steps:

(1) discover a problem or need;

(2) identify alternative courses of action;

(3) prepare a thorough analysis of each possible solution, identifying its total costs, savings, benefits, other financial effects, and any qualitative factors;

(4) choose the best alternative.

Provide an example of a business or personal cost-benefit analysis. Be sure to include the four steps above in your analysis.

Answer 1

Answer is as under :
(1) discover a problem or need;
I am in business of providing professional consultancy services. I have to many time visit the client location for providing the services. Also I need to stay at hotel , for providing the services which is too much expensive . At the day end I get tried of by continuous travelling. My problem is that I am not able to work effectively for my client due to travelling and in terms of money also , I some time think that I am making loss
(2) identify alternative courses of action;
To solve the above problem , I am planning of opening a new branch office nearby the client location. For the same is need to analysis the quantitative and qualitative factors.
(3) prepare a thorough analysis of each possible solution, identifying its total costs, savings, benefits, other financial effects, and any qualitative factors;
Cost saving analysis	Alternative 1 : Get a office on rent at the client location
		(Amount in $)
	Particular	Benefits	Cost
	Service fee received	1,00,000.00	-
	Office Rent paid	-	10,000.00
	Car expenses	-	5,000.00
	Electricity bill	-	1,500.00
	Water bill	-	1,200.00
	Mobile expenses	-	5,000.00
	Salary expenses	-	20,000.00
	Entertainment expenses	-	5,000.00
	Employee welfare	-	15,000.00
		1,00,000.00	62,700.00
	Profit / ( Loss)	37,300.00
	Alternative 2: Travel to client place every day :
	Hotel cost ( For 15 days in month )	50,000.00
	Air fare	20,000.00
	total cost	70,000.00
	Service fee	1,00,000.00
	Profit	30,000.00
In terms of fincial and quantitive factors, Alternative 1 is beneficial
Other qualitative factors are :
Saving of time which will helpful to work efficiently
The time which is saved can be invested on other project
It will lead to work life balance
(4) choose the best alternative.
Best alternative is Alternative 1 as it is financially beneficial with the profit of $ 37,300 and also beneficial in term of quantitative and qualitative factors