American Association of Family and Consumer Sciences (AAFCS) Practice Test

In a cost-benefit analysis, what is heavily relied upon?

1. Historical data

2. Estimation

3. Qualitative reviews

4. Benchmark measurements

The correct answer is: Estimation

In a cost-benefit analysis, estimation is heavily relied upon because this method involves assessing the potential costs and benefits associated with a particular project or decision when exact figures are not available. Estimation allows practitioners to make informed decisions based on projected outcomes, even when definitive data is lacking. This is particularly important in assessing future scenarios where historical data may not directly apply and precise measurements are difficult to obtain. Estimations often involve applying assumptions and predictive models to calculate the expected benefits, which can be expressed in financial terms or other metrics. By incorporating estimates into the analysis, decision-makers can weigh the potential return against anticipated costs, guiding them in determining whether a project is worth pursuing. The other options, while they may contribute in various ways, do not serve as the primary focus of a cost-benefit analysis. Historical data provides context but may not reflect future trends accurately. Qualitative reviews help assess subjective factors but are not quantitatively oriented. Benchmark measurements can be useful for comparison but are not central to the foundational structure of a cost-benefit analysis.