Question

Incremental analysis is most useful 1. in evaluating the master budget. 2. as a replacement technique for variance analysis. 3. in developing relevant information for management decisions. 4. in choosing between capital budgeting methods.

Answer 1

Answer:

The correct answer is number (3): in developing relevant information for management decisions.

Explanation:

Incremental analysis is a study firm makes to allocate resources efficiently. It can be used at the moment of comparing the costs of different products to be manufactured to select the lowest that provides more benefits. Incremental analysis can also be implemented at the moment of identifying how a scarce resource should be used ensuring it brings the highest returns possible.

Incremental analysis, also known as differential or marginal analysis, helps managers to make more informed decisions, then.