Part 2: Cost Benefit Analysis

Assumptions

• In order to simplify the cost benefit analysis, we will not make a net present value calculation for each cost and income.

• Please report all calculations in yearly terms

• Please calculate the cost benefit over a 5 year term

Instructions

• Please create a table that lays out the project cost and benefits (15)

• Please create a table that shows the cost over 5 years (5)

• Please create a table that shows the benefit over 5 years (5)

• Please create a table that compares the costs and benefits (5)

• Which option should Contoso go with? (5)

Company A ERP Implementation Project 1

Will be implemented on site at the Contoso head office. Will require the purchasing of $150,000 of hardware in order to operate properly.

The software has a yearly license cost of $50,000 with no user limits

Company A will be on site at Contoso HQ to install and configure the ERP for 8 weeks for $30,000

Contoso has also decided to bring in a Company A organizational change consultant for the same 8 week duration as the install to help ensure people are embracing the change the ERP is brining. This costs $20,000

Company A has also suggested that other customers budget $10,000 a year for miscellaneous maintenance

It is expected that with Company As ERP there would be a decrease in the number of HR people needed. This is expected to be a savings of $150,000 a year

It is expected that with Company As ERP will greatly improve demand forecasting. This should reduce carrying costs significantly. This is expected to be a savings of $1,000,000/year

Through overall efficiencies and improvements effectively utilizing Company As ERP Contoso is expected to expand revenue by $3,000,000/year

ERP Implementation Project 2

Implementation will take place in the cloud and is offered as Software as a service. So there is no explicit hardware costs however there is a licensing fee of $200/user/month to access the service.

Contoso is expected to need an average of 100 people licensed for the ERP solution

In order to improve the response time of the solution, Contoso would have to upgrade its internet connection which would cost $1200/month.

It is expected that with Company Bs ERP Warehousing software Contoso will be able to use one less warehouse. This is expected to be a savings of $1,500,000/year.

It is expected that with Company Bs ERP Warehousing software Contoso will be able to use 3 fewer accountants. This is expected to be a savings of $250,000/year.

Through overall efficiencies and improvements effectively utilizing Company Bs ERP Contoso is expected to expand revenue by $2,750,000

This is the scenario that I posted above in instruction 2 I am confused because it needs to analyze the cost over 5 years, the solution that is provided on Chegg for the instruction 2 in a bit confusing because it has to calculate yearly cost but for the internet connection fees it is given monthly $1200 which should be calculated yearly but in the solution that is provided is calculated $1200 yearly how that can come because it is monthly. Note: Please check the bold area in the above text.