Key to Business Decisions: Cost Analysis

Every business aims to make a profit while continuing its activities. In order to achieve this goal, effective financial management and planning are important. At this point, cost analysis provides great benefits to businesses. Cost analysis is a critical tool in shaping the production, service delivery and strategic decisions of businesses.

Importance of Cost Analysis

Cost analysis is a method used to understand the production costs, expenses and profitability of the enterprise. This analysis is used to evaluate the financial situation of the business, to increase efficiency and to provide objective information when making decisions. Businesses can gain the following benefits through cost analysis:

1. Variable Costs: Costs that vary depending on the amount of production or the level of service provision. Examples are raw material costs or labor costs.

Fixed Costs: These are the costs that remain constant even if the amount of production or the level of service provision changes. Examples include rents or management salaries.