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Simple Benefit and Cost Analysis
Cost Benefit Analysis Example 3
Simple Benefit/Cost Analysis Tool
This tool is intended to offer a simple method for evaluating possible improvement
options. At this point you should have identified an environmental aspect to work on, and
have established some possible improvement options. Follow the instruction below for
filling in the Benefit/Cost Analysis. An example is also provided.
1. List possible improvement options in the first column.
2. identify all foreseeable costs and benefits associated with each action. Aspects of
costs and benefits can include, but are not limited to the following:
o investment requirements, operating costs, revenue streams,
accurate cost allocation
o training, knowledge, morale, employee retention, health and
safety, absenteeism
o re-tooling, efficiency, inventory, equipment, input costs
o toxic emissions, waste management costs, legal liability, fines
Customers and investors
o new markets, information needs, corporate image, marketplace
differentiation, pricing, competing products
o durability, energy requirements, serviceability, user operating
3. After listing the costs and benefits for an action, assign a numerical ranking of 3,
2, or 1 (high, medium, or low) to describe that action’s total benefits and costs.
4. Lastly, calculate the Benefit-Cost ratio using the formula on the attached
worksheet. The result will be either:
greater than 1: benefits are greater than costs; action should be given a
high priority;
equal to 1: benefits are equal to costs; action should be given a lower
priority; or,
less than 1: costs are greater than benefits; actions should only be
implemented on compelling, non-financial grounds.
5. Rank the improvement options in order, with the improvement option with the
highest result being 1
, the next highest 2
, etc.
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Simple Benefit and Cost Analysis