What is incremental analysis? In what types of situations isincremental analysis most useful? DiscuWhat...

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Accounting

What is incremental analysis? In what types of situations isincremental analysis most useful? Discu

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Incremental analysis studies the cost and revenue differences between the various alternatives to help you arrive at the decision This problemsolving tool mainly focuses on three of the major cost components that need to be understood thoroughly for an effective analysis Relevant Cost The costs and revenues that are different amongst the alternatives as against those that remain same are called relevant costs or relevant benefits For example say you have to decide whether to buy a new piece of machinery or get the existing one repaired Here the insurance and maintenance costs would be different hence relevant whereas the revenue earned from its operation might be the same therefore nonrelevant Sunk Cost Costs that have already been incurred and have no impact on the decision making process are called sunk costs and these are never relevant Some examples of See Answer

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