Cost benefit analysis

Question 1

Non-financial benefits

Answer 1

1. Better communication links between staff
2. An improvement in quality of service provided to clients/customers
3. A more effective reporting system

Question 2

Identify the costs of such a decision, explaining the terms ‘tangible costs’ and ‘intangible costs’ in your response.

Answer 2

Tangible costs are easily identified, quantifiable costs of the change for example buying a new software package. These costs can be calculated based on evidence such as invoices or timesheets. Tangible costs associated with training might include:

• Cost of training course
• Cost of lost chargeable hours (as the staff will not be working on clients’ accounts)
• Travel expenses to the training provider

Intangible costs are costs of the change that are more difficult to identify and quantify eg the cost of lost custom as customers go elsewhere during the disruption caused by the change. These might include:

• Other staff feeling discontent as new staff are provided with training which they did not have.
• Loss of efficiency as new staff’s induction is extended and therefore they are not available for client work
• Client dissatisfaction at delays in completion of work due to staff not being available

Question 3

what is an opportunity cost

Answer 3

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