Decisions are based on expected costs and benefits because decisions lead to results and the results must be favorable. The measure of the favorableness of a result is based on the costs and the benefits.
Full Answer
How do you describe a decision based on expected costs and benefits?
In 1-2 sentences, describe why decisions are based on expected costs and benefits. nataliewatt101 is waiting for your help. Add your answer and earn points. Decisions are based on expected costs and benefits because decisions lead to results and the results must be favorable.
How do you use cost benefit analysis to make decisions?
Cost-benefit analysis (CBA) is a systematic method for quantifying and then comparing the total costs to the total expected rewards of undertaking a project or making an investment. If the benefits greatly outweigh the costs, the decision should go ahead; otherwise, it should probably not.
What are the benefits of strategic decision making?
Higher revenue and sales from increased production or new product. Intangible benefits, such as improved employee safety and morale, as well as customer satisfaction due to enhanced product offerings or faster delivery. Competitive advantage or market share gained as a result of the decision.
What is the outcome of a cost-benefit analysis?
The outcome of the analysis will determine whether the project is financially feasible or if the company should pursue another project. In many models, a cost-benefit analysis will also factor the opportunity cost into the decision-making process.
How can a cost-benefit analysis help people make decisions?
A cost-benefit analysis is a process that helps you determine the economic benefit of a decision, so you can decide whether it's worth pursuing. It's a useful tool when you want to avoid bias in your decision-making process—especially when you're faced with a big decision that will impact your team or project success.
Why is cost-benefit analysis important?
Key Takeaways. Cost-benefit analyses help businesses weigh pros and cons in a data-driven way so they can make complex decisions in a systematic manner. For a successful CBA, leaders need to identify and project the explicit and implicit costs and benefits of a proposed action or investment.
Which is true of decisions made using cost-benefit analysis?
Which is true of decisions made using cost-benefit analysis? The best decision results in the most benefits with the fewest costs.
Who has to weigh the benefits versus the costs of a decision choice?
The most desirable alternative given up is opportunity cost. Decision making grid can help you decide if you are willing to accept the opportunity cost of a choice you are about to make. To make good decisions on the margin, you must weigh marginal costs against marginal benefits.
Why is cost important to a business?
Costing is important to ensure that all expenses are covered and the group fixes a price that ensures a profit. The first and most important step is to identify ALL the costs of a business: production, sales, administrative, overheads, etc.
Why is accurate cost estimation important?
Accurate estimating provides a detailed breakdown of all project costs. Clients are more likely to trust your expertise and expect changes to the cost estimate as the project progresses if they understand the “why” behind a project's cost. This leads to better working relationships.
Why is it preferable to think in terms of costs and benefits?
The key to using the Cost-Benefit principle correctly lies in recognizing precisely what taking a given action prevents us from doing. The only costs that should influence a decision about whether to take an action are those we can avoid by not taking the action.
What is the advantage of using the cost-benefit analysis in making public management decisions?
It helps public administrators understand how to evaluate complex solutions, provide consistency in their analysis, and facilitate comparison across program alternatives. From a decision- makers' perspective, CBA provides benefits expressed in discounted dollars, constant dollars, or economies of scale.
How does cost-benefit analysis help consumers make better economic decisions?
How does cost-benefit analysis help make economic decisions? It reveals the choice with the lowest cost and the highest benefits.
Why do all decisions involve an opportunity cost?
Because of scarcity, every time we do one thing we necessarily have to forgo doing something else desirable. So there is an opportunity cost to everything we do, and that cost is expressed in terms of the most valuable alternative that is sacrificed….
What do you think the owner's decision will be when considering marginal costs and benefits?
What do you think the owner's decision will be when considering marginal costs and benefits? The owner will not hire the worker because the marginal costs of $270 per week are greater than the marginal benefits of $250 per week. "Marginal benefit" is MOST related to what economic concept?
What is the role of marginal cost and benefit when making decisions quizlet?
A "How Much" decision is made using marginal analysis, which involves comparing the benefit to the cost of doing an additional unit of an activity. The marginal cost of producing a good or service is the additional cost incurred by producing one more unit.
Why factor opportunity costs?
Factoring in opportunity costs allows project managers to weigh the benefits from alternative courses of action and not merely the current path or choice being considered in the cost-benefit analysis.
What is cost benefit analysis?
Cost benefit analysis (CBA) is a systematic method for quantifying and then comparing the total costs to total expected rewards of undertaking a project or making an investment. If the benefits greatly outweigh the costs, the decision should go ahead; otherwise it should probably not.
What are the downsides of CBA?
One other potential downside is that various estimates and forecasts are required to build the CBA, and these assumptions may prove to be wrong or even biased. The benefits of a CBA, if done correctly and with accurate assumptions, are to provide a good guide for decision-making that can be standardized and quantified.
What are direct costs?
Direct costs would be direct labor involved in manufacturing, inventory, raw materials, manufacturing expenses. Indirect costs might include electricity, overhead costs from management, rent, utilities. Intangible costs of a decision, such as the impact on customers, employees, or delivery times.
What is competitive advantage?
Competitive advantage or market share gained as a result of the decision. An analyst or project manager should apply a monetary measurement to all of the items on the cost-benefit list, taking special care not to underestimate costs or overestimate benefits.
What are the forecasts used in a CBA?
The forecasts used in any CBA might include future revenue or sales, alternative rates of return, expected costs, and expected future cash flows. If one or two of the forecasts are off, the CBA results would likely be thrown into question, thus highlighting the limitations in performing a cost-benefit analysis.
