Example: Cost Benefit Comparison

The costs associated with implementing this regulation include the purchase of new computer equipment, training costs, and other expenses. The total cost of implementing the regulation is calculated as follows: the purchase of 10 network-ready PCs with supporting software at $2,450 each totals $24,500, the purchase of 1 server at $3,500 adds $3,500, the purchase of 3 printers at $1,200 each totals $3,600, cabling and installation costs $4,600, and sales support software costs $15,000. Training costs include computer introduction for 8 people at $400 each totaling $3,200, keyboard skills training for 8 people at $400 each totaling $3,200, and sales support system training for 12 people at $700 each totaling $8,400. Other costs include lost time of 40 man days at $200 per day totaling $8,000, lost sales through disruption estimated at $20,000, and lost sales through inefficiency during the first two months estimated at $20,000. The total cost is therefore $24,500 + $3,500 + $3,600 + $4,600 + $15,000 + $3,200 + $3,200 + $8,400 + $8,000 + $20,000 + $20,000, which equals $103,200. The benefits of implementing the regulation include tripling of mail capacity, estimated to save $40,000 per year, the ability to sustain telesales campaigns, estimated to save $20,000 per year, improved efficiency and reliability of follow-up, estimated to save $50,000 per year, improved customer service and retention, estimated to save $30,000 per year, improved accuracy of customer information, estimated to save $10,000 per year, and more ability to manage sales effort, estimated to save $30,000 per year. The total benefit is therefore $40,000 + $20,000 + $50,000 + $30,000 + $10,000 + $30,000, which equals $180,000 per year. The net benefit of implementing the regulation is the total benefit minus the total cost. Therefore, the net benefit is $180,000 - $103,200, which equals $76,800 per year. This suggests that the regulation would result in a significant net benefit to the business, indicating that it may be worth supporting.