11 - Decision Making Flashcards
What is an incremental cost?
A cost that can be avoided eg. if a company is going to launch a new product and spend £50k on advertising that product, if they do market research to see if the product will be successful and it turns out it will not be the £50k spend was avoided
What is the equation for ARR (Accounting rate of return)?
Average annual profit/Total investment x 100
What is a cost gap?
The difference between the target cost and the current or budgeted cost
What is use value?
How good a product is at achieving what it was made to do ie. how dry an umbrella keeps you
What is esteem value?
Properties of a product that do not increase effectiveness of the product but instead increase the prestige of the product ie a gold plated pen compared to a regular pen
What is cost value?
Value measured based on the cost of the components use to make it
What is exchange value?
The sales value of a product ie. a limited edition version of a product might be worth more due to the limited amount produced3
