Answer: The reason why incremental analysis is necessary when conducting a rate of return analysis for cost alternatives is because it helps compare the costs and benefits of different options. Incremental analysis involves analyzing the changes in costs and revenues between two or more alternatives.
Explanation: By using incremental analysis, you can determine the additional costs and benefits associated with each alternative, which helps in making informed decisions. This analysis allows you to focus on the relevant costs and revenues that differ among the alternatives being considered.