Question

What is the total cost approach?

-what 2 tools (disciplines) does it use?
-are costs that might be otherwise ignored like inventory carrying costs considered?
-what about cost of lost sales due to a lower customer service level-is that considered?

Answer 1

The total cost approach is a method used in business to calculate the total cost of producing and selling products. It takes into account all the costs associated with the production process, including fixed costs, variable costs, and inventory carrying costs. Two tools or disciplines commonly used in the total cost approach are cost accounting and cost management. Cost accounting involves recording and analyzing costs to determine their impact on the business's financial performance. Cost management involves making decisions and taking actions to control and reduce costs. In the total cost approach, costs that might be otherwise ignored, such as inventory carrying costs, are considered. This is because these costs can have a significant impact on the overall cost of production and can affect the profitability of the business. The cost of lost sales due to a lower customer service level is also considered in the total cost approach. This is because a decrease in customer service can result in lower sales and revenue, which ultimately affects the overall cost of production and profitability of the business.

Step-by-step explanation:

The total cost approach is a method used in business to calculate the total cost of producing and selling products. It takes into account all the costs associated with the production process, including fixed costs, variable costs, and inventory carrying costs.

Two tools or disciplines commonly used in the total cost approach are cost accounting and cost management. Cost accounting involves recording and analyzing costs to determine their impact on the business's financial performance. Cost management involves making decisions and taking actions to control and reduce costs.

In the total cost approach, costs that might be otherwise ignored, such as inventory carrying costs, are considered. This is because these costs can have a significant impact on the overall cost of production and can affect the profitability of the business.

The cost of lost sales due to a lower customer service level is also considered in the total cost approach. This is because a decrease in customer service can result in lower sales and revenue, which ultimately affects the overall cost of production and profitability of the business.