Cost Benefit Analysis

Example

Cost-Benefit Analysis

Cost of TrainingProjected Savings

Cost of Training

Costs of supervisors’ timeCosts of instructors’ timeCosts of teaching materialsCosts of classroom-use

Costs of Supervisors’ Time - $1,296,000

600 supervisors18 hours training per supervisorAverage supervisor costing rate is

$120/hour

600 x 18 x 120 = $1,296,000

Costs of Instructors’ Time

* Preparation time

* Classroom time

Cost of Instructors’ Preparation Time- $10, 800

3 hours preparation per hour of instruction 18 hours of instructionAverage costing rate per hour per

instructor = $200Calculations: 3 x 18 x 200 = $10, 800

Cost of Instructors’ Classroom Time - $72,000

600 supervisors divided by 30 supervisors/session = 20 sessions to teach

18 hours/sessionCosting rate of $200/ hour/instructorCalculations: 20 x 18 x $200 = $72,000

* $ 10,800 Preparation time

* $ 72,000 Classroom time

$ 82,800 Total

Total Costs of Instructors’ Time $82,800

Total time Costs - $1,378,800

$1,296,000 Supervisors’ time cost

$ 82,800 Instructors’ time costs

$1,378,800 Total

Direct Costs

Cost of teaching materialsOff-site training costs

– Classroom Rental– Meals, break items.

Costs of Teaching Materials - $2100.00

Handouts:50 copies/supervisor600 supervisors$0.03 per copyCalculations: 50 x 600 x $0.03 = $900

Other materials (Pens, notepad) = $1200

Total $2100

Off-site Training Costs

Classroom RentalMeals, soft drinks, and snacks.

Cost of Off-site Classes- Classroom Rental = $4000.00

Classroom Rental Cost20 sessions @ 2 days per session = 40 daysClassroom rental is $100/dayCalculations: 40 x $100 = $ 4000

Cost of Meals, etc. - $18,600

$15.00 per lunch includes cost of break items (coffee, soft drinks, snacks)

600 supervisors2 lunches per supervisorCalculations: $15 x 600 x 2 = $18,000 Instructors’ lunches 40 x $15= $600

Total $18,600

Off-site Training Costs- $22,600

$ 4,000 Classroom Rental$18,600 Meals, soft drinks, and snacks.$22,600 Total

Total Direct Costs = $24,700.00

$ 2,100.00 Total cost of teaching materials

$22,600.00 Total off-site costs

$24,700.00 Total direct training costs

Total Costs - $1,401,400

$1,296,000 Total supervisors’ time costs

$82,800 Total instructors’ time

$24,700 Total direct costs

$1,402,500 Total cost of training

Estimated Cost Savings

$18.7014.9 12.7 11.4

6.2

3.72.2

1.3

6.29.9 12.1

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

Nextyear @

25%

2nd year@ 20%

3rd year@ 15%

4th year@ 10%

In M

illi

ons

of d

olla

rs

Projected savingscarried overProjected savings

Projected costs

Benefits-to-Costs Ratios

6.21.44.4

10.1

0.14

71.8

12.2

0.14

87.96

13.5

0.14

97.1

01020

3040

5060

7080

90100

1st Year 2nd Year 3rd Year 4th Year

Savings in $millionsCosts in $millionsBenefit/cost Ratios

An Investment of $1.82 Million in the First Four Years Yields

$41.9 Million Return

1.82

41.9

0

5

10

15

20

25

30

35

40

45

First Four Years

Total CostsNet Savings

Benefit-Cost Ratio= 23 to 1

($41.9 M/$1.82M)

Objective of Proposal

Request authorization for:$ 24,700 in direct costs$1,378,800 in time costs$1,403,500 total cost