Cost benefit analysis for food industry

1. P a g e | 1
Submitting To
Mr. A.K.M. Sarwar Inam
(Assistant Professor)
Department of NFE
Daffodil International University
Submitted By
ID No : 161-34-500
Name : Md.Muhaiminul Islam
Section : Evening
Course Title : Food Engineering and Economics
Course code : NFE-
Date of submission: 24-07-2018
Cost +benefit

2. P a g e | 2
Name of Topics Page no
0.1 Introduction 03
0.2 Process of CBA 03
0.3 Cost benefit Ratio 03
0.4 Cost benefit analysis for food
industry
04
0.5 Example 04
0.6 References 05
Content of Table

3. P a g e | 3
0.1 Introduction:
Cost–benefit analysis (CBA), sometimes called benefit cost analysis (BCA), is a systematic
approach to estimate the strengths and weaknesses of alternatives (for example, in transactions,
activities, functional business requirements or project investments); it is used to determine
options that provide the best approach to achieve benefits while preserving savings.
The CBA is also defined as a systematic process for calculating and comparing benefits and
costs of a decision, policy (with particular regard to government policy) or (in general) project.
Broadly, CBA has two main purposes:
1. To determine if an investment/decision is sound (justification/feasibility) – verifying
whether its benefits outweigh the costs, and by how much;
2. To provide a basis for comparing projects – which involves comparing the total
expected cost of each option against its total expected benefits.
CBA is related to (but distinct from) cost-effectiveness analysis. In CBA, benefits and costs are
expressed in monetary terms, and are adjusted for the time value of money, so that all flows of
benefits and flows of project costs over time (which tend to occur at different points in time)
are expressed on a common basis in terms of their net present value.
Closely related, but slightly different, formal techniques include cost-
effectiveness analysis, cost–utility analysis, risk–benefit analysis, economic impact analysis,
fiscal impact analysis, and social return on investment (SROI) analysis.
0.2 Process:
1. The following is a list of steps that comprise a generic cost–benefit analysis.
2. Define the goals and aims of the project/actions
3. List alternative projects/plans.
4. List stakeholders.
5. Select measurement(s) and measure all cost/benefit elements.
6. Predict outcome of cost and benefits over the relevant time period.
7. Convert all costs and benefits into a common currency.
8. Apply discount rate.
9. Calculate net present value of project alternatives.
10. Perform sensitivity analysis.
11. Adopt recommended choice
0.3 Cost benefit Ratio:
Formula of Cost benefit Ratio:
𝐶𝑜𝑠𝑡
𝑏𝑒𝑛𝑒𝑓𝑖𝑡

4. P a g e | 4
0.4 Cost benefit analysis for food Industry
There are several reason to know cost benefit analysis for food industry such as:
In the identification of sources of costs and benefits related to food quality systems, one needs
to initially define the scope and focus of analysis. In the following discussion we differentiate
the analysis according to the perspectives of different stakeholders. It is considered that
individual enterprises, groups of enterprises, government and consumers will consider food
quality and safety issues under perceptions that are not necessarily unique. Their views will of
course be linked to quality system activities and as such they may in part coincide, but it is
here understood that the identification, evaluation and quantification of costs and benefits will
be influenced by the particular perspective.
As such, this section discusses some of the interests and viewpoints of major stakeholders
including enterprises, chains of vertically cooperating enterprises, sector interests (represented
by institutions of any kind, including government), and public interests (consumers and the
public as a whole).

5. P a g e | 5
References:
1. Stephanie KriegerandGerhardSchiefer, CarlosA.daSilvaR.(FAO-2007) Costsand benefitsin
foodqualitysystems:conceptsandamulti-criteriaevaluationapproach ( available at:
http://www.fao.org/fileadmin/templates/ags/docs/AGSF_WD/AGSF_WD22e.pdf)
2. Cellini,Stephanie Riegg,kee James Edwin"Cost-Effectiveness and Cost-BenefitAnalysis" (PDF)