Week 2 Assignment 2

# Week 2 Assignment 2 - -42 14 Don’t use 40 \$14,000 56 3...

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David A. Givens III Government Budgeting Systems Instructor: Mary Cline Week 2 Assignment 2

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In this assignment, we will begin to use the decision tools you've been reading about. Complete the following: 1. Create a simple decision table that might be used to decide between three alternatives for outsourcing a service for a city government (You will have to fabricate amounts) o The three alternatives should differ in price, quality, and average turnaround time. Your alternatives should include an in-house option, privatization options, and a county alternative. o Use the following format: Criteria In-House Private County Cost \$500 \$1500 \$1000 Quality Low High Medium Turnaround Time 10 hours 2 days 1week 2. Take the alternatives you used in #1 to create an expected value table. Use the template provided in the lecture notes. Options Scenarios Probability of scenarios Outcome Weighted Outcomes Expected Value of each Option Option 1 Use option 70% \$14,000 98 56 Don’t use 30% -\$14,000 -42 Option 2 Use option 50% -\$14,000 -70 0 Don’t use 50% \$14,000 70 Option 3 Use option 60% -\$7,000 -42 14 Don’t use
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Unformatted text preview: -42 14 Don’t use 40% \$14,000 56 3. Take the alternatives you used in #1 to create a weighted score table. Use the template provided in the lecture notes. Alternatives Alternative 1 Alternative 2 Alternative 3 Criteria Weights Score Weighted Score Score Weighted Score Score Weighted Score Cost 40% 10 4 2 .8 4 1.6 Quality 35% 2 .7 10 3.5 5 1.75 Time 25% 10 2.5 5 1.25 2 .5 Total Weighted Score 7.2 5.55 3.85 4. Estimate amounts used in the calculation of a break-even analysis for each alternative in #1. Calculate break-even for each alternative. Break-Even Qty = Fixed costs / (Revenue per unit - Variable cost per unit) Fixed Cost = 70,000 (Contracted amount of units to be produced company is charged weather they are produced or not) Revenue = 5,000 (Amount in pro±t made o² each unit) Variable Cost = 500-1,500-1,000 respecTvely per alternaTve. AlternaTve 1 70,000/ (5,000-500) = 70,000/4,500 = 15.6 AlternaTve 2 70,000/ (5,000-1,500) = 70,000/3,500 = 20 AlternaTve 3 70,000/ (5,000-1,000) = 70,000/4,000 = 17.5...
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