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Cost-Benefit Analysis Theory week 3 discussion 1 first post


What is a cost-benefit analysis and who should be responsible for conducting one?  When is the most appropriate time in the budget cycle to conduct the analysis and why?  Should each cost be subjective to a cost-benefit analysis? Why or why not? 

Our discussion first then the individuals response list references tell bad and good of post thanks

Dave

cost-benefit analysis is a rating of a particular program that determines whether it is valuable and effective.  This means that the positives are weighed or rated against the negatives, economical factors, and the system or program is determined to be of value economically.  The real question that must be asked and answered in this analysis is: Do the benefits to the pubic outweigh the costs to the public?  Our textbook states, “When the project’s impact has been estimated, the worth of its benefits must then be gauged. Such valuation permits comparison of project cost to project returns and helps establish whether the undertaking increases the net well-being of the region. (Mikesell, 2011, p. 312)

A financial analyst should complete the cost-benefit analysis, due to the complex formulas needed to render the proper analysis.  An administrator should have a rough idea of how to complete an analysis, but as stated, “The underlying logic of consumer surplus is relatively simple, although its application is anything but simple…” (Mikesell, 2011, p. 312)  This statement is in reference to a perceptual change that a customer does not receive a tangible good and is therefore not paying a direct price.  This is placed on a curve and is based on that person’s value of the product.  This is complex and a value system must be determined for these types of services.  A product or program that has direct cost can also have non-tangible value (Lauria, 2007).  The administrator can argue the program from the value to the department as they should be the one who knows it best.

A true analysis must be based on actual numbers as future numbers are based on estimates.  The historical numbers do not change, but the future can only be estimated (Mikesell, 2011).  The future numbers can be based and estimated on specific formulas but the actual numbers that appear may be very different, based on any number of variables that may appear.

Every cost, particularly an emergency services department, can be analyzed from a cost-benefit position.  But, this will be highly subjective as the perception of the public is analyzed along with the perceptions of the officers.  This is in regards particularly to the perception of officers, the citizens and the government in the vehicle program (Lauria, 2007).  Many issues can impact the cost-benefit analysis.  This means that a cost-benefit analysis of one program can be indicative of other programs.  Cost-benefit analysis should be used on those projects that have long-term impacts and a high demand for public monies.

References

Lauria, D. T. (2007, May 18). Cost-Benefit Analysis of Tacoma's Assigned Vehicle Program. Police Quarterly, pp. 191-217.

Mikesell, J. L. (2011). Fiscal Administration: Analysis and Applications for the Public Sector. Boston: Wadsworth Cengage Learning.


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