Marginal analysis

Free IMA CMA Part 2 (Strategic Financial Management) lesson in Business Decision Analysis. 18 min read, ~2,734 words.

Relevant costs are future cash flows that differ between alternatives. Sunk costs and unavoidable allocated overhead are ignored. Opportunity cost equals contribution margin forgone from the next-best use of a scarce resource. Always added to the cost of the alternative that consumes that resource. Special order with idle capacity: accept...