� Cost Benefit Analysis
This analysis allows you to look at the expected costs of an item against its expected benefits, to determine the best and / or most profitable course of action. The best way to demonstrate this is through an example!
Example: A Cost Benefit Analysis for Purchasing a New Computer System for the Social Start Up
A new computer system will costthe following:
The benefitsof the new computer system will be:
� Equipment
� Training
� Time( training, transfer from one system to another, adjustment to the new system, etc)
� Loss of marketing and sales focus while developing and transferring to the new system Total = Euro 10,000
� Improved customer service
� Ability to undertake internet based marketing and sales
� Improved sales management
� More effective web-based presence
� Increased efficiency
Total = Euro 18,000
10,000 / 18,000 = 0.555of the benefits
This means that it will take less than a year to recuperate the full cost of the new computer system if it is bought, as these costs make up 55 % of the benefits.
� Break Even Analysis
This allows you to identify the Break Even point when Sales / Membership = Costs. Therefore, it is an indication of the volume of sales and memberships you will need to achieve to cover the costs of the social start up.
To determine the Breakeven Point, you will need to have: 1. all your fixed costs and, 2. the variable cost of producing one item
Once you have these figures, you can calculate the Break Even point. The best way to demonstrate how you calculate the Break Even point is through an example!
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