benefit cost 1

Please use Excel to answer.

The fire chief in a coastal city that surrounds a harbor has long expressed his concerns to the city manager that the harbor is not adequately protected in case of a boat fire or a fire in a structure on the harbor. Marine fire protection is currently provided on a contract basis with private tugboats at an annual cost of $12,000. For the past 7 years, the company has not been able to man its fireboat between the hours of midnight and 7 am. This represents a very serious deficiency in the city’s fire defense plan in that most of the serious fires occur during this time frame. In a memorandum to the city manager, the chief offers two options

Option 1: Maintain the present level of service with the company, which provides a manned fireboat 17 hours a day and recalls off-duty personnel for 7 hours a day, with a response time of approximately 60 to 90 minutes. Twenty – year total cost with annual increases of 5 % = $ 397,000

Option 2 Have the fire department operate a city-owned fireboat, which could also be used for marine rescue, code enforcement, and monitoring and containment of water pollution on a 24-hour basis.

Capital cost $175,000

Mooring facility $10,000

Total maintenance over 20 years $50,000

Total cost- $235,000

It is recommended that Option 2 be adopted for the following reasons:

The fireboat would be available for prompt response to fire and life rescue assignments on a 24-hour basis.

The cost saving projection over the 20-year period would be $162,000.

Do you agree with the fire chief’s recommendation? Why or why not? Be specific, in your response to this case

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