Management and Organizational Studies 2310A/B Chapter Notes - Chapter 11: Marginal Cost, Operating Leverage, Fixed Cost

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 2310A/B
• Professor: Stacey Hann

Document Summary

The more sensitive, the greater the forecasting risk. Make a decision: at some point you have to make a decision, once we have the results, there is no simple decision rule that tells us what to do. If the majority of your scenarios have positive npv"s then you can feel reasonably comfortable about accepting the project. If you have a crucial variable that leads to a negative npv with a small change in the estimates, then you may want to forgo the project. Variable costs: variable costs costs that change when the quantity of output changes, example direct labour costs and raw material costs. Total costs: total costs sum of variable costs and fixed costs, marginal cost (incremental) the cost to produce one more unit, same as variable cost per unit. Accounting break even: accounting break even the sales level that results in zero project net income, often used as an early stage screening number, useful tool for project analysis.