Question

The information system of Carlsbad Bottle Inc. is deemed to be 90 percent reliable. A major threat in the procurement process has been discovered, with an exposure of $300,000. Two control procedures are identified to mitigate the threat. Implementation of control A would cost $18,000 and reduce the risk to 4 percent. Implementation of control B would cost $10,000 and reduce the risk to 6 percent. Implementation of both controls would cost $26,000 and reduce the risk to 2.5 percent. Given the information presented, and considering an economic analysis of costs and benefits only, which control procedure(s) should Carlsbad Bottle choose to implement?

Answer 1

Carlsbad Bottle Inc. should implement both control procedures, A and B, for the highest level of risk mitigation at a reasonable cost.

Step-by-step explanation:

Carlsbad Bottle Inc. should choose to implement both control procedures, A and B. Although control A is more expensive than control B, it reduces the risk to a lower percentage (4%). Control B is less costly but reduces the risk to a higher percentage (6%). However, implementing both controls would result in the lowest risk percentage (2.5%) at a slightly higher cost compared to implementing control A alone. Therefore, implementing both control procedures would provide the highest level of risk mitigation at a reasonable cost.

Answer 2

Answer: B

Step-by-step explanation:

Control. Benefits. Cost. Net

A. (96/100*300,000)

288,0000.( 18,000.) 270,000

B. ( 94/100*300,000)

282,0000. (10,000) 272,000

C 97.5/100*300,000

292,500 (26,000) 266,500

The cost benefits analysis compares the cost to the benefits to be derived from a project and chosed the project with the highest benefits.

The reduction in the exposure means the reduced percentage is a benefit and the amount spent is a cost, subtracting the cost from the benefits gives us net benefits and the project with the highest net benefits is chosen for implementation.