This is interesting. I don't know whether the image here in this blog will work. I sure hope it does.Cost and benefit classification
1) Explain the classification of cost and benefit.
The following are the classification of cost and benefit:
Tangible and intangible cost and benefit
Direct and Indirect cost and benefit
Variable and Fixed cost and benefit
a) Tangible and intangible cost and benefit
Tangible cost is one that can be measured in terms of currency. Eg: The cost of a USB flash stick can be measured.
Intangible cost is one that cannot be measured. Eg: Communication failure is one that can cause loss to an organization. Such losses due to communication failure cannot be measured.
Tangible benfit is one that can be measured. It need not be in terms of currency only. Eg: A lower end version of USB flash stick has a storage space of 256 MB (equivalent to 177 floppies). The benefit to the user is that it can be used to store large amount of information and can carried easily.
Intangible benefit is one that cannot be measured. Eg: Installation of a DBMS has several benefits like prevention of redundant data, easy access, different views such as cartesian, etc.
b) Direct and Indirect cost and benefit
Direct cost is one that is to be borne totally by the user or organization. Eg: Cost printed on the outer carton of products.
Indirect cost is one that is not direct i.e, dependent on supplier, distributor, etc. Eg: Taxes levied by the respective governments on products from time to time.
Direct benefit is one that is of use to the consumer. It helps him straight. Eg: An ATM benefits the user because at any time he can withdraw or deposit money from/to his account.
Indirect benefit is one that protects the interest of an organization other than the consumer/user himself. Eg: Installation of ATM's help the bank by doing away with manual record maintenance and transaction.
c) Fixed and variable cost and benefit
Fixed cost is one that doesn't vary from time to time. It remains constant over a period of time. Eg: Cost of hard disk remains constant for a particular period of time.
Variable cost is one that can vary from time to time. It doesn't remain fixed. Eg: Inflation can increase the cost of commodities from time to time.
Fixed benefit is one where each user/consumer gets the same benefit. Eg: In the usage of a DBMS, each user gets the same benefit such as easy access, prevention of redundant data, privacy, etc.
Variable benefit is one that is not fixed i.e, each consumer / user gets different benefits. Eg: In a DBMS used in an organization with security measures installed to prevent crash of the system, the top most level of the organization can gain access to all portions of the information in the database whereas blue-collar workers have restricted access i.e, they can view only certain portions of the database. Here the benefit varies from the top level management to the bottom level management.
