Objectives: Introduction Over View of System Analysis and Design
APPENDIX Include exhibits, correspondence on project, and other
Download 0.94 Mb. View original pdf
|
| APPENDIX Include exhibits, correspondence on project, and other miscellaneous documentation. 5.10 Summary Data analysis is a prerequisite to cost benefit analysis. System investigation and data gathering lead to an assessment of current findings. From the analysis, the system deign requirements are identified, and alternative system evaluated. In developing cost estimates fora system, we need to consider several cost elements. Among them are hardware, personnel, facility, operating and supply costs. Cost benefit analysis is a procedure that gives a picture of the various costs, benefits and rules associated with a system. The determination of costs and benefits entails the following steps • Identify the costs and benefits pertaining to given project. • Categorize the various costs and benefits for analysis. • Select a method of evaluation. • Interpret the results of the analysis. • Take action. Cost and benefit determination is to categorize costs and benefits. They maybe tangible or intangible, director indirect, fixed or variable. When all financial data have been identified and broken down into cost categories, the analyst must select a method of evaluation. Several evaluation methods are available, each with pros and cons. The common methods are • Net benefit analysis • Present value analysis • Net present value • Payback analysis • Break-even analysis • Cash-flow analysis When the evaluation of the project is complete, the results have to be interpreted. In summary, cost benefit analysis is a tool for evaluating projects rather than a replacement of the decision-maker. In real-life business situations, whenever a choice among alternatives is considered, cost / benefit analysis is an important tool. The final decision following cost/benefit analysis is to select the most cost-effective and beneficial system for the user. |