ECONOMICS

Detailed explanation-1: -Incremental analysis (also referred to as the relevant cost approach, marginal analysis, or differential analysis) is a decision-making tool used to assess financial information. The three main concepts relevant to incremental analysis are relevant cost, sunk cost, and opportunity cost.

Detailed explanation-2: -What Is Incremental Analysis? Incremental analysis is a decision-making technique used in business to determine the true cost difference between alternatives. Also called the relevant cost approach, marginal analysis, or differential analysis, incremental analysis disregards any sunk cost or past cost.

Detailed explanation-3: -Example of Incremental Analysis A company receives an order from a customer for 1, 000 units of a green widget for $12.00 each. The company controller looks up the standard cost for a green widget and finds that it costs the company $14.00. Of this $14.00, $11.00 is variable cost and $3.00 is fixed cost.

Detailed explanation-4: -Incremental analysis is the process of identifying the financial data that change under alternative courses of action.