To understand the importance of performing a cost/benefit analysis.

Instructions

1. Whether you realized it at the time, you perform a cost/benefit analysis with every decision you make (consciously or subconsciously). Should you go on that winter vacation, or save the money for a rainy day? Should you buy that new car you always wanted, or keep your current vehicle for a bit longer?

Using learning outcomes one to four, describe a time you weighed the relevant costs and benefits of a decision. Provide specifics for how you determined something was relevant (or not) and what your ultimate decision was.

2. Read the example story below:

Example: I recently purchased a new home. With this purchase, comes a long list of decisions. Do I want carpet or hardwood? Granite or quartz countertops? While picking out the kitchen appliances, my wife and I went to the store to check out different models of dishwashers. The salesman showed us two models that could go with our package. On the outside, both models had the same appearance, were from the same manufacturer, and had the same warranty.

The main difference between the models was one used slightly less water (marketed as 'eco friendly') and completed the wash cycle 15 minutes sooner. The salesman was recommending this model to us because of these features (supposedly). I asked if there were any other differences between the models. The salesman replied, "no." I inquired about the price. Not surprisingly, the 'eco friendly' model was $300 more. I asked if the salesman was paid by commission. He said "yes." Now I can see why he was recommending one model over the other (the real reason being his commission).

I started to perform a cost benefit analysis on whether the 'eco friendly' model was the right choice for us. When I asked about the water difference between the two models, it turns out we were talking about a few millilitres of water per wash cycle (providing savings so small on a water bill, that they'd be difficult to quantify above a few pennies every year). Therefore, this 'feature' is irrelevant and can be ignored for purposes of this analysis. I then considered the last feature, the '15-minute faster wash time.' Was there ever a time in my life that I was sitting in front of the dishwasher eagerly waiting for the cycle to complete? No. If anything, I usually waited until the next day when the sink piled up again with dishes before unloading the dishwasher. So, this 'feature' was also irrelevant to me. This only left the price difference.

In the end, we selected the less expensive model. The relevant benefits (none in this case) didn't outweigh the relevant costs (an extra $300). There was no real reason to spend an extra $300 on the 'eco friendly' model. After all, no one comes to your house to marvel at your 'eco friendly' dishwasher.

3. Review the discussion rubric prior to submitting.