Unit 10 question

mini_schnauzer

I'm going around in circles - a question regarding the knowledge and understanding part of Unit 10:

How do you measure cost effectiveness?

I think I am making the question harder in my head than it really is - but I have cold brain (and I havent even eaten ice cream!)

Thanks in advance

sdv

mini_schnauzer wrote: »

I'm going around in circles - a question regarding the knowledge and understanding part of Unit 10:

How do you measure cost effectiveness?

I think I am making the question harder in my head than it really is - but I have cold brain (and I havent even eaten ice cream!)

Thanks in advance

Every weakness that you have identified in your project, you should be able to evalute the improvements in terms costs and cost effectiveness of your recommendations to improve/ eradicate the weakness.

for example

weakness: invoices posted late to customers:
Recommendations: invoices should be posted the same day as goods delivered.
Question? If invoices were posted 5 days late, what will it cost the company?

effectively the customer is receiving 5 days extra credit.
therefore £1 times 15% bank overdraft rate divide by 365 days times 5 equals the cost of interest payable to bank on the company's overdraft. = £0.002

If the value of invoice was £500 the cost = £1.00
If the value was £500,000 cost = £1000

and you can go on.........