The document compares the costs and benefits of software options A, B, and C. It finds that software A has the lowest costs at $6,600 but the lowest cost-benefit ratio of 0.91. Software B has higher costs of $16,500 but the highest cost-benefit ratio of 1.82, indicating it provides the best benefits. A cost-benefit analysis of software B shows monthly costs of $1,000 but monthly net savings of $3,500, making it the optimal choice. The document also covers break-even analysis and calculating return on investment.

1. Week 15
Learning Objectives

2. Costing Analysis
• Cost-Benefit Ratio:
– Cost Benefit ratio = Benefit / Ratio
– The Costs of the software A,B and C
Software A B C
Fixed Costs 5,000 10,000 20,000
Variable Costs 1,000 5,000 10,000
10% Contingency 600 1,500 3,000
Total Costs 6,600 16,500 33,000
– From the analysis above, software A looks the
cheapest to purchase.

3. Costing Analysis
• Cost-Benefit Ratio:
– The Benefits of the software A,B and C
Software A B C
Enhance Productivity 1,000 10,000 5,000
Better response to customer 5,000 20,000 1,000
Total Benefits 6,000 30,000 6,000
Software A B C
Cost-Benefit ratio 6,000 / 6,600 30,000 / 16,500 6,000 / 33,000
= 0.91 = 1.82 = 0.18
From the cost-benefit ratio calculation above, it is noted that software B
brings the best benefit to the company.

4. Costing Analysis
• Cost-Benefit Analysis:
Description Total Tot. monthly cost
Purchase cost (depreciation 5 yrs.) - 10,000 10,000/5/12 = - 167
License (depreciation 5 yrs.) - 50,000 50,000/5/12 = - 833
Revenue +30,000
Productivity Gain +5,000
Better customer orders +1,000
Net Savings +3,500

5. Break-Even
• Break Even , N = Fixed Cost (Fc) / unit cost
where unit cost = selling price – Unit variable
cost
Example:
Fc = 15,000
Selling Price = 500
Unit var cost = 50
N = 15,000 / (500 – 50) = 33

6. ROI, Return of Investment
• ROI = (Gain – Cost ) / Cost
• Example: Gain = 10,000
Cost = 8,000
ROI = (10,000 – 8,000) / 8,000
= 0.25

7. Eastman Kodak Co
• Video on Kodak declaring bankruptcy
• Digital world of film
• Question: If you were given a project to start-
up Kodak what are the list of things that you
would embark on?

9. Last Chapter
• Video on Control of project
• Project tracking & closing