April 1999
SA205: SYSTEMS ANALYSIS

QUESTION 2

Total Marks: 20 Marks

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SAMPLE STUDENT'S SOLUTIONS
for Question 2

 
(a) Give one example of each of the following:
(i) Tangible costs. [1]
(ii) Intangible costs. [1]
(iii) Tangible benefits. [1]
(iv) Intangible benefits.

 

 [1]
(b) (i) One cost category associated with determining economic feasibility is annual operating costs. Describe two others. [4]
(ii) What is the equation for calculating annual operating costs? [1]
(iii) List four examples of annual operating costs. [4]
(iv) Given below is an example of the costs investigated after the preparation of a project proposal. Calculate the final annual cost based on the figures below. [4]
 
Initial investment costs:
Hardware/software materials $ 2,000
Development Team

 

 $ 15,000
Annual costs
Fixed costs:
Rent $ 1,000
Insurance $ 1,000
Equipment maintenance $ 500
Variable costs:
Salaries (due to down-sizing)

 

 $50,000
Conversion (implementation) plan:
Availability of required hardware cost $ 2,000
Conversion method (parallel)

 

 $ 5,000
Post-development:
Maintenance - first year $ NA
Upgrade in the third year $ 5,000 +
additional maintenance fees $ 1,000
Predicted re-investigation
due to technological advancements
conducted in the tenth year $ 10,000

 
(c) Define with the use of a diagram, the term break-even analysis. [3]