DEFINITION of 'Incremental Analysis'
A decisionmaking technique used in business to determine the true cost difference between alternatives. Incremental analysis ignores sunk costs and costs that are the same between the two alternatives to look only at the remaining costs. For this reason, it is also called the "relevant cost approach," "marginal analysis" or "differential analysis."
BREAKING DOWN 'Incremental Analysis'
If a company is considering replacing its old copy machine, using incremental analysis, the company would not look at the cost of the existing copy machine because it is a sunk cost (the cost of buying it cannot be reversed). They would look at things like the cost of toner cartridges for each machine, the cost of the electricity run each machine, and most importantly, the time saved by having employees use a more efficient model and perhaps the cost savings of being able to prepare documents inhouse instead of outsourcing them.

Fixed Cost
A cost that does not change with an increase or decrease in the ... 
Sunk Cost
A cost that has already been incurred and thus cannot be recovered. ... 
Irrelevant Cost
A managerial accounting term that represents a cost, either positive ... 
Valuation Analysis
A form of fundamental analysis that looks to compare the valuation ... 
Relevant Cost
A managerial accounting term that is used to describe costs that ... 
Depreciated Cost
1. The value of an asset net of all accumulated depreciation ...

Active Trading
An Introduction To Depreciation
Companies make choices and assumptions in calculating depreciation, and you need to know how these affect the bottom line. 
Fundamental Analysis
Inventory Valuation For Investors: FIFO And LIFO
We go over these methods of calculating this component of the balance sheet, and how the choice affects the bottom line. 
Options & Futures
Car Shopping: New Or Used?
Don't get taken for a ride. Learn the pros and cons before the salesperson makes a pitch. 
Investing Basics
What Does In Specie Mean?
In specie describes the distribution of an asset in its physical form instead of cash. 
Economics
Calculating Cross Elasticity of Demand
Cross elasticity of demand measures the quantity demanded of one good in response to a change in price of another. 
Fundamental Analysis
Emerging Markets: Analyzing Colombia's GDP
With a backdrop of armed rebels and drug cartels, the journey for the Colombian economy has been anything but easy. 
Fundamental Analysis
Emerging Markets: Analyzing Chile's GDP
Chile has become one of the great economic success stories of Latin America. 
Investing
Watch Your Duration When Rates Rise
While recent market volatility is leading investors to look for the nearest exit, here are some suggestions for bond exposure in attractive sectors. 
Economics
Explaining Capital Flows
The movement of money for investing, trade or business production, is commonly referred to as capital flows. 
Investing
Yellow Light Trade Risk Management
Being in the stock market for so long I tend to look at the world through the eyes of a trader, but how to decide when we are presented with two options?

What is the utility function and how is it calculated?
In economics, utility function is an important concept that measures preferences over a set of goods and services. Utility ... Read Full Answer >> 
How can I use a regression to see the correlation between prices and interest rates?
In statistics, regression analysis is a widely used technique to uncover relationships among variables and determine whether ... Read Full Answer >> 
How do I calculate a modified duration using Matlab?
The modified duration gauges the sensitivity of the fixed income securities to changes in interest rates. To calculate the ... Read Full Answer >> 
How do I calculate the rule of 72 using Matlab?
In finance, the rule of 72 is a useful shortcut to assess how long it takes an investment to double given its annual growth ... Read Full Answer >> 
How do I calculate the standard error using Matlab?
In statistics, the standard error is the standard deviation of the sampling statistical measure, usually the sample mean. ... Read Full Answer >> 
How do I adjust the rule of 72 for higher accuracy?
The rule of 72 refers to a time value of money formula that investors use to calculate how quickly an investment will double ... Read Full Answer >>