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Week 3, DQ1 - processing can lead to losses • Should...

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Week 3, DQ1 What are some of the qualitative factors to consider in an incremental analysis? Give an example of how a decision from a real company had a significant qualitative feature as well. An incremental analysis (sometimes referred to as marginal or differential analysis) is a process used to discover the impact of changes in revenues or costs, when given a specific potential scenario. The desired result of incremental analysis is to analyze financial information and make the appropriate decision. The following are examples of decisions that involve incremental analysis: Make or buy: should the company manufacture the part or component or purchase it from a supplier? Changes in production/technology: Adjustments in costs will result when production procedures are modified or if new technology is introduced. Special orders, like rush delivery, small production run, or modified
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Unformatted text preview: processing can lead to losses. • Should additional business be accepted? Will it be profitable to accept more business, if it does not go over 100% of operating capacity? Qualitative factors are elements involved in decision-making that cannot be quantified or expressed in dollars and cents. If a qualitative factor is expressed in monetary terms, it will be with great difficulty and inaccurate. Qualitative factors can be items like: product reliability, effect on employee morale, relationships with suppliers, commitments to suppliers, and effect on customers. In a make or buy decision, qualitative factors to be considered can be: labor cost, storage, and time. This is a real-life example of what the company I work for had to consider when deciding on Ardell eye lash production....
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