Willowbrook School
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
Eliminate 30 hours of
overtime each month at $8.50
per hour
Eliminate need for additional
40 hours per month in next
school year
Eliminate monthly errors
For in-house option:
consultant’s time to develop
system
For in-house option:
Networked commercial
database software for inhouse development
For package option: vertical
software package from vendor
For package option:
consultant's time to install,
configure, and test vendor
package
For package option: vendor
tech support contract
Clinic staff time to perform
maintenance, file backups,
and updating
Consultant's time to provide
initial training and support
Hardware requirements
Financial Impact
Annual savings of 30 hours * $12
hourly rate * 12 months = $4,320
Description of Cost or Benefit
Direct, operational, variable,
positive benefit
Avoidance of annual cost of
40 hours * $12 hourly rate *
12 months = $5,760
Potential annual savings of 10
hr/month = 10 * $12 hourly
rate * 12 months = $1,440
$50 hourly rate * 25 hours * 8
weeks = $10,000
Direct, operational, variable,
cost-avoidance benefit
$2,000
Direct, developmental, fixed
cost
$2,500 in year 0, followed by
2 annual payments of $2,500,
for a total of $7,500
$50 hourly rate * 40 hours * 3
weeks = $6,000
Direct, developmental, fixed
cost
Annual cost of $1000 after
first year of operation
Annual cost of 4 hours * $12
hourly rate * 52 weeks =
$2.496
$50 hourly rate * 5 hours * 8
weeks = $2,000
$3,000
Direct, operational, fixed cost
Direct, operational, variable,
positive benefit
Direct, developmental, fixed
cost
Direct, developmental, fixed
cost
Direct, operational, fixed cost
Direct, developmental, fixed
cost
Direct, developmental, fixed
cost
2. Develop an economic feasibility analysis, using payback analysis, ROI, and
present value (assume a discount rate of 8 percent).
COST BENEFIT SUMMARY
DATA FOR PLAN A: In-House Development
Costs:
Consultant time to develop system
Purchase necessary software platform
Hardware
Consultant training time
Office staff maintenance, backup, and update
Total Costs:
Benefits:
Eliminate overtime
Eliminate additional position
Eliminate daily errors
Total Benefits:
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
10,000
2,000
3,000
2,000
17,000
2,496
2,496
2,496
2,496
2,496
2,496
2,496
2,496
2,496
2,496
-
4,320
5,760
1,440
11,520
4,320
5,760
1,440
11,520
4,320
5,760
1,440
11,520
4,320
5,760
1,440
11,520
4,320
5,760
1,440
11,520
DATA FOR PLAN B: Purchase Vertical Software Package
Costs:
Purchase price for vendor package
Tech support contract
Consultant time to install, configure, and test
Hardware
Consultant training time
Office staff maintenance, backup, and update
Total Costs:
Benefits:
Eliminate overtime
Eliminate additional position
Eliminate daily errors
Total Benefits:
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
2,500
2,500
500
2,500
500
500
500
500
6,000
3,000
2,000
13,500
2,496
5,496
2,496
5,496
2,496
2,996
2,496
2,996
2,496
2,996
-
4,320
5,760
1,440
11,520
4,320
5,760
1,440
11,520
4,320
5,760
1,440
11,520
4,320
5,760
1,440
11,520
4,320
5,760
1,440
11,520
PAYBACK ANALYSIS
PLAN A: In-House Development
Costs
17,000
2,496
2,496
2,496
2,496
2,496
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
Cumulative
Costs
17,000
19,496
21,992
24,488
26,984
29,480
Benefits
11,520
11,520
11,520
11,520
11,520
Cumulative
Benefits
11,520
23,040
34,560
46,080
57,600
70,000
60,000
Payback: about 11 months
into year 2
50,000
40,000
30,000
20,000
10,000
Year 0
Year 1
Year 2
Year 3
Cumulative Costs
Year 4
Year 5
Cumulative Benefits
PLAN B: Purchase Vertical Software Package
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
Costs
13,500
5,496
5,496
2,996
2,996
2,996
Cumulative
Costs
13,500
18,996
24,492
27,488
30,484
33,480
Benefits
11,520
11,520
11,520
11,520
11,520
Cumulative
Benefits
11,520
23,040
34,560
46,080
57,600
70,000
Payback: about 2
months into year 3
60,000
50,000
40,000
30,000
20,000
10,000
Year 0
Year 1
Year 2
Cumulative Costs
Year 3
Year 4
Cumulative Benefits
Year 5
RETURN ON INVESTMENT (ROI)
PLAN A: In-House Development
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
Costs
17,000
2,496
2,496
2,496
2,496
2,496
Cumulative
Costs
17,000
19,496
21,992
24,488
26,984
29,480
ROI = (Total Benefits - Total Costs) / Total Costs
Benefits
11,520
11,520
11,520
11,520
11,520
Total Benefits:
Total Costs:
Net
ROI:
Cumulative
Benefits
11,520
23,040
34,560
46,080
57,600
57,600
29,480
28,120
95%
PLAN B: Purchase Vertical Software Package
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
Costs
13,500
5,496
5,496
5,996
2,996
2,996
Cumulative
Costs
13,500
18,996
24,492
30,488
33,484
36,480
ROI = (Total Benefits - Total Costs) / Total Costs
Benefits
11,520
11,520
11,520
11,520
11,520
Total Benefits:
Total Costs:
Net
ROI:
Cumulative
Benefits
11,520
23,040
34,560
46,080
57,600
57,600
36,480
21,120
58%
PRESENT VALUE ANALYSIS
PLAN A: In-House Development (Using 8 percent discount factor)
Benefits
Factor (8%)
PV of Benefits
Year 0
1.000
-
Year 1
11,520
0.926
10,668
Year 2
11,520
0.857
9,873
Year 3
11,520
0.794
9,147
Year 4
11,520
0.735
8,467
Year 5
11,520
0.681
7,845
Costs
Factor (8%)
PV of Costs
17,000
1.000
17,000
2,496
0.926
2,311
2,496
0.857
2,139
2,496
0.794
1,982
2,496
0.735
1,835
2,496
0.681
1,700
Net Present Value:
Total
46,000
26,967
19,033
PLAN B: Purchase Vertical Software Package (Using 8 percent discount factor)
Benefits
Factor (8%)
PV of Benefits
Year 0
1.000
-
Year 1
11,520
0.926
10,668
Year 2
11,520
0.857
9,873
Year 3
11,520
0.794
9,147
Year 4
11,520
0.735
8,467
Year 5
11,520
0.681
7,845
Costs
Factor (8%)
PV of Costs
13,500
1.000
13,500
5,496
0.926
5,089
5,496
0.857
4,710
5,996
0.794
4,761
2,996
0.735
2,202
2,996
0.681
2,040
Net Present Value:
Total
46,000
32,302
13,698
3. Provide a brief explanation of the various alternatives that should be investigated
if development continues, including in-house development and any other possible
strategies.
Chapter 5 presents an extensive discussion of development strategies, including
in-house development, purchase of a software package from a vendor,
customizing a vendor-supplied package, using an application service provider,
outsourcing, and developing user applications. Students should mention each
alternative, and cite the main advantages and disadvantages of each.
4. Suggest a coding scheme for use in the after care hours report, that would identify
which time block(s) are being billed for on any particular day. You will need to
refer back to Chapter 3 to review the time blocks available in after care.
The following is a sample coding scheme. Student schemes should be exclusive,
and simple.
Time Block Coding Scheme
Time Block Code
Noon – 1:30
Noon – 3:30
Noon – 5:30
1200_130
1200_330
1200-530
1:30 – 3:30
1:30 – 5:30
3:30 – 5:30
130_330
130_530
330_530