Business decisions involve a choice among alternative courses of action. In making such decisions, management ordinarily considers both financial and nonfinancial information. The process used to identify the financial data that change under alternative courses of action is called incremental analysis.

  1. Incremental analysis involves not only identifying relevant revenues and costs, but also determining the probable effects of the decision on future earnings.
  2. Data for incremental analysis involves estimates and uncertainty.
  3. Gathering data may involve market analysts, engineers, and accountants.