Struggling with a question, please help :)

alicemaylara

I have come across this question in Unit 10

8. How do you measure cost effectiveness?

But im struggling to understand what it is asking for. Does anyone have any ideas?

Thanks

mikes

looking at wikipedia, for cost effectiveness. it came up with this quote.

Cost-effectiveness analysis (CEA) is a form of economic analysis that compares the relative expenditure (costs) and outcomes (effects) of two or more courses of action. e.g. the problem is to determine how best to comply with a legal requirement. Typically the CEA is expressed in terms of a ratio where the denominator is a gain in health from a measure (years of life, premature births averted, sight-years gained) and the numerator is the cost of the health gain. The most commonly used outcome measure is quality-adjusted life years (QALY).

Cost-effectiveness analysis is generally not equivalent to cost-benefit analysis (CBA).

I don't know if this will be of help, or how to apply it in any senario.

alicemaylara

Perhaps its trying to get at life cycle costing? Who knows:laugh:
Thanks

timhamer

Unit 10 is I think the project?

In which case I would suggest that cost effectiveness wants you to look at "value for money," i.e. how you can get most benefit from the least cost.

How to measure it will depend on the situation you are covering, but perhaps you could look at how to achieve an objective with the least cost, or how much value is added per £ of expenditure.

For example, if you were looking at choosing the most cost effective type of lorry to transport your product you could compare the cost of transport per mile, per product for two different lorries.

PGM

alicemaylara wrote: »

I have come across this question in Unit 10

8. How do you measure cost effectiveness?

But im struggling to understand what it is asking for. Does anyone have any ideas?

Thanks

Simple answer is; return for the monetery input, of a process etc.

Its not about effective use of money, or company strategy.

So measure cost effectiveness by comparing outputs to the inputs (cost).

alicemaylara

That's great thanks, it's a key technique question so required a general answer those explanations really help.