SKILLS TEST – COST
BENEFIT
Pete's Cola Company is investigating the possibility
of adopting a lean thinking philosophy throughout
their organization.
Estimated costs to set up the computer system are
$1,660,000; training employees in lean operations
is estimated to cost $175,000; and the general
expenses of establishing the program are estimated
at $313,000. The estimated value of the potential
savings is $1,950,000. Do the benefits outweigh the
costs or do the costs outweigh the benefits, and by
how much?
Copyright © 2018, 2016, 2014 Pearson Education, Inc.
SKILLS TEST
Costs outweigh benefits by $198,000
Proof:
Benefits:
New
Costs:
Net:
$1,950,000 (potential savings)
($175,000) (training)
($1,660,000) (computer system)
($313,000) (general expenses)
($198,000)
(costs out weigh benefit of project)
Copyright © 2018, 2016, 2014 Pearson Education, Inc.