Cost-Benefit Analysis An approach used to support a decision making process at the time of new project selection, expansionary decisions, diversification of business, etc. The costs and benefits are as follows,
Costs may include capital and recurrent costs, production and delivery costs, fixed and variable costs.initial production costs are high but then tend to become lower over time. There is a distinction between fixed and variable costs is important when comparing technologies.
- Capital costs are the expenses associated with the purchase of equipment and materials needed for the innovation.
- Recurrent or operating costs are expenses that occur on a regular basis (eg, yearly) in order to run a program.
- production and delivery costs are the costs associated with the development and delivery of a particular innovation or process re-engineering effort.
The benefits can be assessed both quantitatively and qualitatively. Quantitative data can be obtained from market/customer surveys. Qualitative data can be obtained through interviews or via written feedback via a number of channels. Benefits may include, performance-driven benefits, value-driven benefits, societal benefits.
- Performance driven benefits include aspects such as organizational outcomes, customer satisfaction, and return on investment.
- Value-driven benefits include increased access, flexibility or ease of use.
- Societal benefits may include environmental aspects such as reduced traffic and pollution, unemployment, and the potential for new markets.