We would like to hear about some of the analysis that you have done over your career and how it impacted the bottom line.  Differential Analysis, what I like to think of as the real bread and butter of Management Accounting, the analysis that makes businesses more profitable; make/buy; plant consolidation; capital equipment purchase; etc.  In my professional life I can think of several right off hand, and each of them had an impact on the bottom line; consolidating two locations that were both involved with light electrical assembly; outsourcing a product that was a big seller but only mildly profitable (the standard cost of this product was not representative of the actual cost as a significant portion of the cost had been shoved into overhead, so I reevaluated the standard and did the analysis, we ended up outsourcing the entire production process under license and now I see it almost everytime I go to a doctor or dentist).   A sample definition I found:

Decision making technique in which evaluation is confined to only those factors which are different or unique among possible alternatives. It usually involves four steps: (1) compute all costs associated with each alternative, (2) ignore the sunk costs, (3) ignore costs that remain largely constant among the alternatives, and (4) select the alternative offering the best cost-to-benefit ratio. Also called incremental analysis or relevant cost analysis.  Read more: http://www.businessdictionary.com/definition/differential-analysis.html#ixzz2yVL14GNn

In case you are still confused, I found a good example at:  http://www.theglobaltutors.com/management-accounting/differential-cost-analysis.aspx



This entry was posted in Differential Analysis. Bookmark the permalink.