Date: July 28, 2008
Time: 11 PM
Place: Kitchen
The merits of only considering costs that change are that it is totally applicable in most situations. When making decisions, sunk costs and fixed costs don't change & are usually irrelevant. Incremental analysis deals with changes in revenue and cost.
The shortcomings are that some decisions need to take fixed costs into consideration. For example, dropping a product line will increase the amount of common costs that the remaining product lines have to bear.
It's important to not only consider the quantitative costs that will change, but also the qualitative changes. It's not all about numbers. The text cites employee morale and supplier relations as examples of qualitiative changes.
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