ACCT 346 - Week 3 Threaded Discussion - Incremental Analysis

ACCT 346 - Week 3 Threaded Discussion - Incremental...

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ACCT 346 Managerial Accounting - Week 3 Threaded Discussion - Incremental Analysis Post #1: Please discuss the situations under which incremental analysis is beneficial, and Post #2: How it may be used in each situation? Post #1: Decisions, decisions, decisions! The busy season is upon me in my catering business and I am receiving calls from different clients for jobs that occur on the same day. Before this class, I would agonize over whether to take both jobs… struggle with delivering on time, consider hiring another chef at $30 an hour, or decide to keep all my profit but run myself ragged by doing it all. Often I have made the latter choice and invariably run late for one job, or the food quality is not up to par on the other. Sometimes I just barely make it with both jobs finishing on time and to the clients' satisfaction. I need to incremental analysis of such situations when they occur. Incremental analysis is about determining the marginal costs and revenues incurred when one decision alternative is chosen over another. A business owner can use it to figure out if she'll make more money (incremental revenue); or if she'll incur more expenses (incremental cost) choosing one action or job over another. In the end, she wants to go for the option that yields an incremental profit, namely the difference between incremental revenue and incremental cost. Situations that can benefit from Incremental Analysis are: 1. Adding and dropping production segments or lines, 2. Make or buy decisions, 3. Utilization of a constrained resource, 4. Special orders, and 5. Deciding whether to sell or process further.
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ACCT 346 - Week 3 Threaded Discussion - Incremental...

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