Reference no: EM132501219

Agree or DisAgree? And Why?

Question 1: Explain the role of incremental analysis (analysis of incremental costs and revenues) in management decisions

• Incremental analysis is the process of determining a choice amongst alternatives. Jiambalvo (2016), lists three types of incremental analysis: revenue, cost, and profit. I think incremental costs are kind of like opportunity costs in an away. You weigh the pros and cons of alternatives and then determine the most profitable option. Banton (2019), states that incremental analysis is used by management to determine the true cost difference between alternatives while dismissing sunk-costs. My issue with these calculations is that they are often used as a pass-fail, but I think managers need to look at the non-cost factors as well. For instance, if a company wants to look at staying open all weekend, they will look at the costs and usually determine that they can make more profits the more days they are open. The issue is that the decision does not consider non-cost factors like the effect on the employee's family lives. I think all economic analysis needs to determine the true cost, but also determine if that extra juice is worth the squeeze.