In this post, you will find information about;

1- Introduction    2- Purpose    3- Example of Road Scheme    4- Example of Seminar    5- Intangible benefits

 

Introduction


Cost benefit analysis (CBA) is widely used to add up the benefits of project and reduce the costs of that project. As its name shows, costs are ongoing in this method and benefits are received.

Cost benefit analysis basically serves the two main purposes that are:

1- Help to approach and evaluate the program, project or policy proposal.
2- A process by which ultimate business decisions are made.

In this analysis, benefits of a given program are summed and costs incurred on this program are subtracted. You can better understand the meaning of cost benefit analysis from following example.

Cost Benefit Analysis Example

 

If we have to conduct cost benefit analysis of a road scheme, we will just measure the road building costs and received economic benefits that can be improvement in transport links and convenience. Road building costs will be subtracted from financial benefits of the road building. Cost of environmental damage and benefits of quick and easier travel will not be added to do cost benefit analysis of this road scheme.

Cost Benefit Analysis Method

Here is method of conducting cost benefit analysis of a training seminar. In this method we will see how a training seminar can feasible financially. This analysis will compare the costs incurred on training seminar and benefits received from it. Different types of cost benefit analysis methods are given and some of them are very complex. But here we will discuss comparatively an easy method of cost benefit analysis that consists of three steps.

1. Cost calculation
2. Benefits calculation
3. Results comparison

Costs of training seminar are calculated first and all direct and indirect costs are included in it.

 

Personal and labor costs + Training material + Delivery costs = cost calculation
Tangible benefits that can be received from training seminar are:
Time: Hours * full cost of employees = time saved
Material: material cost is summed on monthly or annual basis.
Equipment: costs of the equipment / total hours for it is used = equipment value
Productivity: Hours * equipment value = productivity improved
Reduction of other personal problems: full cost of each employee is calculated by days or hours for which they work
Intangible benefits cannot be given dollar value but trainer will deeply consider the costs and benefits of training seminar and then will make decisions whether training should be conducted or not.

Intangible benefits can be considered as:

• Customer satisfaction
• Employee motivation
• Achievement
• Recognition
• Responsibility
• Good will of the organization.

Simple ratio of costs to benefits will answer the question that should training seminar conducted or not?

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