A reply to Lakisha on the meaning of incremental approach that is used in business and its impact in the decision-making processes of the company
Student reply
1. A reply to Lakisha on the meaning of incremental approach that is used in business and its impact in the decision-making processes of the company.
Additionally, give the examples of how the incremental approach is used in a business.
LAKISHA DELAGARZA
Answer in 150 words or more
Hi Instructor,
One of the important accounting approaches that is used within the management team is the incremental analysis approach. It is “the process of identifying the financial data that change under alternative courses of action” (Kimmel, Weygandt, & Kieso, 2016, p. 976). I am faced with many different factors with making decisions to keep the company successful. There is no traditional method in my daily duties. Working in a medical retail store manager it is all about placement of things, price, stock, and choices of merchandise to carry. If we sold a lot of fresh food and snacks this week should I purchase more for sale or keep the order quantity the same because the future is unsure. If there is more fresh products purchased than the week before we could lose money if sales stay the same. Both cost and revenue is affected. It is all based on making a good judgement. The usual steps for making decisions are “identifying the problems and assigning responsibility, determine and evaluate possible courses of action, make a decision, and review results of a decision” (Kimmel, Weygandt, & Kieso, 2016, p. 975). This accounting approach connects with other steps within accounting like evaluating overhead costs and activity-based costing. For example, if a manufacturer decides to change the amount of product it creates, the cost of overhead may alters when the decision to replace or repair equipment, to chose cheaper raw materials to produce, cut hours, or cut back on expenses. Theses are all forms of how incremental analysis is used amongst managers or those in charge of making these decisions. There may be different courses of action but the manager has to chose the one with the most priority.
Kimmel, P.D., Weygandt, J.J., & Kieso, D.E. (2016). Accounting Tools for Business Decision Making (6th ed.). Retrieved from The University of Phoenix eBook Collection database
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