Introduction:

There are many problems of traffic in every country. Every country has some and regulations to reduce the accidents on the roads but we cannot eliminate the number of accidents on roads. We can reduce the number of traffic accidents on roads by using different protection like better lighting system at night time, etc. now we are going to study a case related traffic accidents on roads. For this, we will use different techniques and we will analyze that which technique is batter in this situation.

Benefit cost ratio analysis is mostly used in public projects. This technique produces a result consistent with annual cash flow analysis, worth analysis, and rate of return analysis. The model is used to solve engineering economy problem and select alternatives by checking his results. This method is famous in public projects.

 

We can take two decisions based on this benefit- cost analysis ratio.

Condition Appropriate criterion
When only 1 investment alternative Invest only if benefit-cost ratio is greater than or equal to 1.
When two or more alternative are under consideration Use high cost alternative if B/C analysis ratio is > 1. Otherwise, use low cost alternative.

 

The second approach that we will use in order to study this case is cost-effectiveness analysis. This analysis is used in all fields like education, health, etc. In this approach, we compare the costs of different things and see their effects. It is different from the cost-benefit technique in which we assign momentary value to fin the effects.

In this case study, we will use four alternatives and check which is justified and applicable by using cost-benefit analysis.

 

Background Review:

Benefit cost ratio analysis is mostly used in public projects. This technique produces a result consistent with annual cash flow analysis, worth analysis, and rate of return analysis. The model is used to solve engineering economy problem and select alternatives by checking his results. This method is famous in public projects.

We have a case of traffic accident reduction by using benefit-cost analysis. We will compare and see the C/B analysis and cost-effectiveness analysis by using same information that is given in our case. We know that most accidents happen due to the poor light system on roads that is the number of accident at night are greater than the number of accident at daytime. We have all the data related a high ways of almost 87.8 km long. We want to install a lighting system by analyzing different things to reduce the road accidents on highway.

We have two situations, a day and a night. We have 5-years record of highway accidents at daytime and a nighttime. More we also have a data of accidents on roads with or without lighted. In addition, after calculation we saw a great difference between the numbers of accidents. The ratio of accident without lighted highways was greater than the light highways.

We have already discussed in introduction section that we cannot use alternative until the benefit-cost ratio is equal or greater than the one. We will observe four alternatives one by one and will see that which one of them is justified.

 

Analysis and calculations:

According to the case requirements, we will analysis four alternative. The first one, we already see that is not justified. Similarly analyze the remaining three alternatives.

Condition/ alternative1:

In this condition, we have some information. Let see:

  • Light pole every 67 meter
  • Total highway length is 87.8 km
  • Installation cost of one pole is $3500
  • Every pole has two bulbs, each of 400w

After calculations the value of C/B and C/E are follows:

C/B= 0.96

C/E= $6265

After the calculations, we saw that the C/B ratio is less 1. Therefore, it is not justified.

 

Condition/ alternative 2:

 

In the 2nd condition, we have information:

  • Light pole every 134 meter
  • Total highway length is 87.8 km
  • Installation cost of one pole is $3500
  • Every pole has two bulbs, each of 400w

The total annual installation cost= ($3500) (87.8 km/0.134)

= $2,292,500

Annual power cost= (655 poles) (2 bulbs) (0.4 w) (12 hours in a day) (365 days) (0.10 per kWh)

= $229,512 per year

We have total 5-years data. Therefore, the annualized cost C at I= 6% per year is

Total Annual cost= $ 2,292,500(A/P. 6%, 5) + $229,512

= $ 756,603.6

Now

C/B= 1.95

C/E= $3063

Condition/ alternative 3:

In the 3rd condition, we have information:

  • Light pole every 67 meter
  • Total highway length is 87.8 km
  • Installation cost of one pole is $2500
  • Every pole has two bulbs, each of 350w

 

The total annual installation cost= ($2500) (87.8 km/0.0.067)

= $3257, 000

Annual power cost= (1310 poles) (2 bulbs) (0.35 w) (12 hours in a day) (365 days) (0.10 per kWh)

= $401,646 per year

We have total 5-years data. Therefore, the annualized cost C at I= 6% per year is

Total Annual cost= $ 3,257,000(A/P. 6%, 5) + $401,646

= $1,102,993.8

Now

C/B= 1.34

C/E= $4466

 

Condition/ alternative 4:

In the 4th condition, we have information:

  • Light pole every 134 meter
  • Total highway length is 87.8 km
  • Installation cost of one pole is $2500
  • Every pole has two bulbs, each of 350w

 

The total annual installation cost= ($2500) (87.8 km/0.134)

= $1,637,500

Annual power cost= (655 poles) (2 bulbs) (0.35 w) (12 hours in a day) (365 days) (0.10 per kWh)

= $200,823 per year

We have total 5-years data. Therefore, the annualized cost C at I= 6% per year is

Total Annual cost= $ 1,637,500(A/P. 6%, 5) + $200,823

= $551,496.9

Now

C/B= 2.68

C/E= $2232.78

 

The summary listed in a table:

Alternative C/B C/E
W 0.96 6265
X 1.95 3063
Y 1.34 4466
Z 2.68 2232

 

After checking all the alternatives, Z is justified and by using Z, we can reduce the number of Accident up to 50%. X and Y are also justified but when we have more than 1 alternative under consideration than we prefer the high cost alternative otherwise we use low cost alternatives.

3)

We have done all the calculations by using both benefit-cost analysis and cost-effectiveness analysis. If we use all light in the unlighted portion then we can prevent many property damage. The detailed calculations given below:

There would be

= (379) (0.406)

= 153 instead of 199

So the difference will be = 199-153

E = 46

At the cost of $6000 per accident, the benefit cost is

B= (46) ($6000)

= $276,000

 

4) We saw that in the case of “W” we have the ratio of the accidents in the night to day was 0.401. Now Z is the best alternative then all available options. The number of Accident will reduce by applying Z alternative so the night to day ratio will decrease.

 

Discussion and opinion:

In this case, we are studying high way accidents due to the poor lighting system. We have four alternatives and we used these alternatives based on cost-benefit analysis and cost- effectiveness analysis. We calculated all the values for 4 alternatives W, X, Y, and Z. We saw that Z has high cost-benefit ratio than all other alternatives so we can use it on the highway for reducing accidents.

5)

Cost-benefit and cost-effectiveness analysis are two similar, but distinct, methods for assessing the efficiency of projects, including business investments, corporate policies and government programs.

Cost-effectiveness analysis is used in all fields like education, health, etc. In this approach, we compare the costs of different things and see their effects. It is different from the cost-benefit technique in which we assign momentary value to fin the effects.

Benefit cost ratio analysis is mostly used in public projects. This technique produces a result consistent with annual cash flow analysis, worth analysis, and rate of return analysis. The model is used to solve engineering economy problem and select alternatives by checking his results. This method is famous in public projects.

In this case, we will prefer the Cost-benefit analysis because in this analysis we studied projects. In business private and govt, mostly cost-benefit analysis is used which is more technical and industrial because it is easy to put monetary values in it. Cost-effectiveness is not good for public projects because we face difficulty while putting dollar or monetary values on human outcomes. There are some other techniques also used to analyze the cost of these public projects like investment cost analysis and cost allocation analysis.

 

Summary:

We studied the case of highway accidents in different situations. We had a five years data of accidents on lighted highways and unlighted highways. Beside this, we also had a data of accident that happen in daytime in nighttime. We compare the ratios of lighted and unlighted highways. We saw that the number of accidents in unlighted highway is greater than the lighted area.

To reduce the number of accidents at the nighttime on highway. We planned to installed the light on highways of 87.8 km. We had four alternatives, which we studied and calculated their values and analyze it by using cost-benefit and cost-effectiveness approaches. We had four different situations that are listed below.

Condition/ alternative1:

In this condition, we have some information. Let see:

  • Light pole every 67 meter
  • Total highway length is 87.8 km
  • Installation cost of one pole is $3500
  • Every pole has two bulbs, each of 400w

Condition/ alternative 2:

 

In the 2nd condition, we have information:

  • Light pole every 134 meter
  • Total highway length is 87.8 km
  • Installation cost of one pole is $3500
  • Every pole has two bulbs, each of 400w

Condition/ alternative 3:

In the 3rd condition, we have information:

  • Light pole every 67 meter
  • Total highway length is 87.8 km
  • Installation cost of one pole is $2500
  • Every pole has two bulbs, each of 350w

Condition/ alternative 4:

In the 4th condition, we have information:

  • Light pole every 134 meter
  • Total highway length is 87.8 km
  • Installation cost of one pole is $2500
  • Every pole has two bulbs, each of 350w

We calculated all the values of all alternatives and saw that the Z has high C/B ratio than all the other alternatives. Therefore, we will prefer it in this public project. We will prefer the Cost-benefit analysis here because in public projects like these we always prefer cost-benefit technique.

 

 

 

References:

[1] Plot nick, Robert D. (1994), “Applying Benefit-Cost Analysis to Substance Abuse Prevention Programs.” International Journal of the Addictions. 29 (3): 339–359.

[2] Cellini, Stephanie Riegg; Kee, James Edwin. “Cost-Effectiveness and Cost-Benefit Analysis”

[3] Hemakumara, GPTS, Cost-Benefit Analysis Of Proposed Godagama Development Node under The Greater Matara Development Planning Program, International Research Journal of Management and Commerce ( Vol ( 4) 9 September 2017, ISSN ; 2348-9766

[4] Boardman, N. E. (2006). Cost-benefit Analysis: Concepts and Practice (3rd ed.). Upper Saddle River, NJ: Prentice Hall.

[5] Canadian Cost–Benefit Guide: Regulatory Proposals, Treasury Canada, 2007.

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