Microsoft Word - Mgt252.Module05 Exercise.docMgt 252 Module 5 Exercises1. Benefit-cost analysis...

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Microsoft Word - Mgt252.Module05 Exercise.doc
Mgt 252 Module 5 Exercises
1. Benefit-cost analysis experts agree that to the extent you can quantify benefits and costs, you should do this. However, some people complain that there are many things that cannot be quantified, so they resist engaging in quantitative benefit-cost analyses.
Certainly, some things are harder to quantify than others. For example, quantifying potential customer satisfaction with a new product your company plans to produce is not easy to do. Nonetheless, by conducting surveys of potential customers, engaging in focus group studies, and testing prototypes of the product on customers, you can develop a reasonable quantitative sense of possible customer satisfaction with the product. The point is that ultimately, everything can be quantified. The real issue is whether you
attempt at quantification is valid and really reflects what you want to measure.
Describe how you might be able to measure the following benefits:
•
User friendliness of a new data entry screen for an accounting system (give three examples)
•
Cost savings associated with implementation of a new supply chain management system (give three examples)
[Reference slide 5-10]
2. In building a large hydroelectric dam in Batundaland, a substantial portion of the country’s electric power needs can be met. However, the dam will create a lake that will be the
eeding grounds of snails that lead to a devastating
disease called bilharzia, and this disease can affect a significant portion of the population. The World Bank is asked to provide loans to fund this project. The World Bank requires that a benefit-cost analysis be conducted on all projects
it funds that assesses the impacts of the project on society (including health impacts). In designing this benefit-cost analysis, what are some specific issues that need to be addressed when examining the trade-offs of the benefits of electric power production against the costs of increased health problems in portions of the population?
[Reference slide 5-22]

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David · Accepted Answer

Cost benefit Analysis 
1. Benefit-cost analysis experts agree that to the extent you can quantify benefits 
and costs, you should do this. However, some people complain that there are many 
things that cannot be quantified, so they resist engaging in quantitative benefit-cost 
analyses. 
Certainly, some things are harder to quantify than others. For example, quantifying 
potential customer satisfaction with a new product your company plans to produce is not 
easy to do. Nonetheless, by conducting surveys of potential customers, engaging in focus 
group studies, and testing prototypes of the product on customers, you can develop a 
reasonable quantitative sense of possible customer satisfaction with the product. The 
point is that ultimately, everything can be quantified. The real issue is whether your 
attempt at quantification is valid and really reflects what you want to measure. 
Describe how you might be able to measure the following benefits: 
• User friendliness of a new data entry screen for an accounting system 
(give three examples) 
• Cost savings associated with implementation of a new supply chain 
management system (give three examples) 
Solution: 
User friendliness of a new data entry screen for an accounting system is a benefit for an 
organization. These benefits can be analyzed from the increase in the employee satisfaction 
which will benefit the organization in decrease in employee turnover. With the user friendliness, 
the duration for understanding the accounting system which be minimized and the company can 
work on positive and productive results.

Microsoft Word - Mgt252.Module05 Exercise.doc Mgt 252 Module 5 Exercises 1. Benefit-cost analysis experts agree that to the extent you can quantify benefits and costs, you should do this. However,...

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