Question

A certain type of injury has tangible costs of $15,000 per occurrence and intangible costs estimated to be $250,000 per occurrence. Injury frequency is 0.01 per year, but would be reduced by half with the installation of a new engineering control system.What annual benefit would the new system provide?

Answer 1

Answer:

Annual benefit provided by New system = $1,325

Explanation:

Given:

Tangible cost =  $15,000

Intangible cost = $250,000

Frequency of injuries = 0.01 per year

New frequency of injuries = (0.01)/2 = 0.005 per year

Computation:

Total cost = Tangible cost + Intangible cost

Total cost = $15,000 + $250,000  

= $265,000

Before New system installation:

Expected cost per year  = Total cost per incident x Frequency of injuries

Expected cost per year = $265,000 x 0.01 = $2,650

After New system installation: .

Expected cost per year  = Total cost per incident x New frequency of injuries

Expected cost per year = $265,000 x 0.005 = $1325

Annual benefit = $2,650 - $1,325 = $1,325