Question

Briefly explain the cost-benefit approach to decision making. Give an example of the practical use of this approach.

Answer 1

Cost Benefit Approach to decision making-It is a tool use by organisation to determine which action will benefit for the organisation. It consider both qualitative and quantitative component for analysis of the value for money for a particular investment.so basically it involve all the cost associated with the project and all benefit that will derive in future.it can be understand with a simple practical approach for e.g - A company management want to purchase a software of $20000 for the the company use.Purchasing a software is a cost for company so management will analyse whether company will be able to derive more profit than the cost of software.so in this case company use cost benefit approach if it will be beneficial like after purchasing software number of transaction can increase ,there will be reduction in employee cost,then they will purchase software otherwise cancel the decision if it will cost more than the benefit.