Cost-Benefit Analysis

timer Asked: Oct 16th, 2018
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Question Description



Conduct a cost-benefit analysis using a template, and explain the concept of opportunity cost and how a cost-benefit analysis aligns with organizational needs. Recommend a plan of action based on the cost-benefit analysis.

Questions to Consider:

  • What are the differences between variable and fixed costs? How do these affect financial forecasting?
  • What is the purpose of a cost-benefit analysis?


Use Plowman's Cost-Benefit Analysis Template to complete Part 1 of this assessment. Use the following scenario that continues the scenario from Assessment 2 as the foundation for this assessment:

One of the physician's groups in the clinic would like to purchase an MRI machine. Currently, clients who need an MRI must schedule an appointment at another facility, adding time and cost to any treatment they may need. The machine will be available for all the physicians in the clinic and will require additional staff to operate the equipment and the office area where it will be housed.

You must prepare a cost-benefit analysis to present to the physicians so they may decide whether to move forward with the purchase. Be sure to consider the non-monetary costs, such as productivity, as well as the non-monetary benefits, such as improved customer satisfaction. Although these may be difficult to quantify, they are important costs and benefits that must be considered.


Prepare a two-part cost-benefit analysis.

Part 1
  • Complete the cost-benefit analysis template for the purchase of an MRI machine for the clinic.
Part 2

Based on the cost-benefit analysis, write a 2–3-page summary:

  • Explain the concept of opportunity cost.
  • Explain how the cost-benefit analysis aligns with organizational needs and future growth.
  • Recommend a plan of action that is supported by the cost-benefit analysis. (Should the clinic purchase the MRI machine, or not?) Reference specific areas of the analysis in your recommendation.

Required Resources

The following resources are required to complete the assessment.

This resource includes information on writing a cost-benefit analysis as well as a spreadsheet template for a simple cost-benefit analysis.

This tool provides a step-by-step guide with a real-world example.


Suggested Resources

The resources provided here are optional and support the assessment. They provide helpful information about the topics. You may use other resources of your choice to prepare for this assessment; however, you will need to ensure that they are appropriate, credible, and valid. MHA-FP5006: Health Care Finance and Reimbursement Library Guide can help direct your research. The Supplemental Resources and Research Resources, both linked from the left navigation menu in your courseroom, provide additional resources to help support you.

Additional Resources for Further Exploration

You may use the following optional resources to further explore topics related to competencies.

This web page provides an example of a cost-benefit analysis.

These textbook chapters contain information on cost concepts and decision making, product costing, and the management control process.

This is a website of the leading association for health care finance leaders with links to industry initiatives, education, forums, and publications.

Unformatted Attachment Preview

1. Analyze the cost and benefits of purchasing equipment for a health care organization. Analyzes the cost and benefits of purchasing equipment for a health care organization and considers how the purchase aligns with the organizational financial strategy. 2. Explain the concept of opportunity cost. Explains the concept of opportunity cost and how it affects the profit margin of an organization. 3. Explain how a cost-benefit analysis aligns with organizational needs and future growth. Explains how a cost-benefit analysis aligns with organizational needs and future growth, as well as community needs and industry trends. 4. Recommend a plan of action based on a cost-benefit analysis. Recommends a plan of action based on a cost-benefit analysis and predicts the results. ...
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Tutor Answer

School: UCLA

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Cost-Benefit Analysis



Cost-benefit analysis is a technique that is essential to compare the costs of acquiring and
maintaining a project to the benefits it brings to an organization or person. The common metric
used is a monetary value. In this scenario, it enables the calculation of the net cost or benefit
associated with the purchase and maintenance of an MRI machine.
Opportunity Cost
The opportunity cost of an intervention is what is foregone as a result of adopting a new
intervention. The analysis of an opportunity cost in health care is used in suggestions such as
how much good health would be lost if more money was allocated to a certain intervention
instead of another. it analyses the most and least productive current investment in terms of health
for any new resources. The concept o...

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