Question

Create a business decision based on the company where you work, a small business you hope to own someday or just make something up - then identify, define and explain an incremental cost, opportunity cost and sunk cost. You will need to be somewhat creative in your response.

Answer 1

Answer and Explanation:

Incremental can be defined as the turn in the total amount as a specific decision. While Incremental revenue states that the change in total income which results from a specific criterion.

According to the incremental principle, A decision can be specified profitable when it is a growth in income instead of amount while sunk cost (which is already incurred and it can not be regained.

let us take an example I 'm starting a Pizza house. I select a spot close schools and colleges because my key focus group is students. I will nominate an experienced cook and will incur more costs (incremental costs) if the demand for the goods is high. I should obtain at least reasonable prices of raw materials from a wholesaler. The cost of setting up a Pizza house etc. would be minimized. I will launch this combo package to attract students and follow the aim of optimizing revenue rather than maximizing profit