Benefit Cost Ratios

Just like they sound, benefit/cost ratio (BCR) models examine the cost-to-benefit ratio. A typical measure is the cost to complete the project and the cost of ongoing operations of the project product compared against the expected benefits of the project. For example, consider a project that will cost $575,000 to create a new product, market the product, and provide ongoing support for the product for one year. The expected gross return on the product, however, is $980,000 in year one. The benefit of completing the project is greater than the cost to create the product.

EXAM NOTE BCR statements can be written as ratios. For example, a BCR of 3:2 has three benefits to two costs—a good choice. A BCR of 1:3, however, is not a good choice. Pay special attention to which side of the ratio represents the cost; it should not be more than the benefit if you want the project to be selected.

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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