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Unformatted text preview: Shorecliff College Chapter 5 Solutions 1. Provide an overview of the proposed system, including costs and benefits, with an explanation of the various cost-and-benefit types and categories. Cost or Benefit Financial Impact Description of Cost or Benefit Eliminate 25 hours of overtime per month Annual savings of 25 hours * $22 hourly rate * 12 months = $6,600 Direct, operational, variable, positive benefit Eliminate student worker position Avoidance of annual cost of 20 hours * $12 hourly rate * 12 months = $2,880 Direct, operational, variable, cost-avoidance benefit Capture of lost revenue, 3% of receipts Annual savings of 3% * $340,000 = 10,200 Direct, operational, variable, positive benefit For in-house option: consultants time to develop system $35 hourly rate * 32 hours * 3 weeks * 2 positions = $7,350 Direct, developmental, fixed cost For package option: vertical software package from vendor $9,000 in year 0 Direct, developmental, fixed cost For package option: consultant's time to install, configure, and test vendor package $35 hourly rate * 35 hours *4 weeks = $3,675 Direct, developmental, fixed cost For package option: vendor tech support contract Annual cost of $1,000 after first year of operation Direct, operational, fixed cost Staff time to perform maintenance, file backups, and updating Annual cost of 4 hours * $22 hourly rate * 52 weeks = $4,576 Direct, operational, fixed cost Consultant's time to provide initial training and support $30 hourly rate * 30 hours = $900 Direct, developmental, fixed cost Hardware requirements $3,000 Direct, developmental, fixed cost Network upgrades $5,000 Direct, developmental, fixed cost 2. Develop an economic feasibility analysis, using payback analysis, ROI, and present value (assume a discount rate of eight percent). COST BENEFIT SUMMARY...
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This note was uploaded on 10/05/2011 for the course ECON 2301 taught by Professor Econmaster during the Spring '11 term at Dallas Colleges.
- Spring '11