Cost analysis is the process of developing and analyzing cost data from different business elements and estimating the total resources needed to implement the project. Cost analysis normally considers the value of total resources whether or not was purchased directly or indirectly (Campbell and Brown 23). Finally, a decision is made after analyzing the costs to determine which project to implement. Below is the cost analysis of the creation of a computer program to automate the quarterly driver audit process as well as an expanded human resources department to deal with appeals and firings.
Cost Analysis for Creation of the Computer Program
Resource Cost Data
The first step was to collect data on the resources required for the implementation of the computer program (Campbell and Brown 24). The project requires resources for it to be successful. It requires resources such a computer experts for running the program, installing different software and repairing the computers. Another key resource required is the initial cost of purchasing the computer program. After summing up the total resources for implementing the program, the company has to invest $.40, 000.
Analyzing of Fixed Cost and Variable Cost
There are fixed costs allied with the program. These costs includes the extra rental cost for the program, the hiring of permanent staff to implement the program. The approximately fixed cost for running the program is $2,000. The variable cost of the program includes wages for the temporary drivers who will be dismissed after failing the probation costs. The estimated variable cost for the program is $1500 thus making the total cost of the project to be $3,500 (Campbell and Brown 27).
Estimation of Value of the Project
The project is estimated to increase the revenues of the company. The project will counter the challenge of hiring unqualified drivers who ruin the reputation of the company. The project is projected to generate revenues of $105,000 (Ostwald 34).
Decision Making
As it can be seen in the graph, the revenue of the project exceeds the total cost of implementing and operating the project. So it will be a wise decision to implement the program. The program will make the company more profitable (Ostwald 39).
Cost Analysis for Human Resources Department to Deal with Appeals and Firings.
Resource Cost
For the implementation of the program for human resource department expansion, several resources are required for the program. First the organization has to employ competent staff for dealing with the issues of appeals and firing of the drivers. Then the company has to invest additional funds for compensating the drivers whom contracts have been terminated (Ostwald 40).
Fixed Cost and Variable Costs
The new expanded human resource department will constitute employees who are employed permanent and pensionable. So the salaries will be fixed cost totaling $ 40,000. Then there will be wages for temporary drives that will be $ 20,000. The total cost will amount $60,000 (Ostwald 54).
Estimation of Value of the Project to the Company.
The implementation of the program will have an insignificant impact on the revenues of the company. The expansion of the human resource department will stretch the current salaries and wages burden of the company. The execution of the scheme is estimated to generate revenue totaling $50,000 (Ostwald 59).
Decision Making
The project will be costly to the company because it will increase the salaries and wages cost of the company. The project will make the company operate at a loss as it can be seen in the graph because the cost of the project overweighs the expected revenues. So it will be wise not to implement the project (Ostwald 60).
Works Cited
Campbell, Harry F, and Richard P. C. Brown. Benefit-cost Analysis: Financial and Economic Appraisal Using Spreadsheets. Cambridge [u.a.: Cambridge Univ. Press, 2003. Print.
Ostwald, Phillip F. Construction Cost Analysis and Estimation. Upper Saddle River, N.J. [u.a.: Prentice Hall, 2001. Print.
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