What are the other factors you should consider?

“The first step is to measure whatever can be easily measured. This is OK as far as it goes.

The second step is to disregard that which can’t be easily measured or to give it an arbitrary quantitative value. This is artificial and misleading.

The third step is to presume that what can’t be measured easily really isn’t important. This is blindness.

The fourth step is to say that what can’t be easily measured really doesn’t exist. This is suicide.”

Daniel Yankelovich

Net economic impact and indifference point are only two decision premises among several others. Besides quantitative factors, decision makers need to also take into account qualitative factors before reaching a conclusion. Just because quantitative factors cannot be measured in financial terms does not make them irrelevant. I will discuss more specifically three families here: risks, strategy, and corporate social and Environmental responsibility (CSER).

Quantitative factors are outcomes that can be measured in numerical terms.

Qualitative factors are outcomes that cannot be measured in numerical terms.


As you will see in the sect sections, the decisions made do not only affect Operating Income, but also the cost structure and therefore the degree of operating leverage. Typically, decisions which reduce cost variability will also result in a more volatile Operating Income and thus may be rejected in highly turbulent or declining environments.

Some decisions also imply creating a dependence towards a supplier. It is then crucial to make sure that the supplier has a sound financial situation (i.e. the supply is unlikely to be compromised by the suppliers’ bankruptcy) and can deliver the appropriate level of quality on time. Another important point, which is related to both quality concerns and CSER concerns discussed later, the company may be held responsible for, and sometimes even liable, for the practices of its suppliers.

Finally, some decisions can have a huge impact on employees’ morale and this impact should not be taken lightly.


Some products and services may have a great strategic value and the company may treat their losses as an investment. For instance, some products lines are complements (i.e. the consumption of one requires the other) while others are substitutes (one can be consumed instead of the other). Depending on the situation, decisions related to one will thus affect in a different way the others.

Moreover, the company should also always consider how some decision may affect its control over the value chain and the competitive advantage it builds. If a component is crucial to set the company apart from its competitors, outsourcing its production does not make sense even if the suppliers offer highly attractive prices and conditions.

Corporate Social and Environmental Responsibility

Finally, we mentioned earlier that differential analysis focuses on costs and benefits relevant to the decision at hand and to the decision maker. But most decisions also result in other costs and benefits for other organizations, the society, and the environment.

In that regard, the best price offered by some suppliers may be obtained at the expense of people (e.g. unsafe working conditions, outrageously low remuneration) or the planet (e.g. dumping chemical materials in the environment instead of treating them). It is the duty of a responsible manager to make sure that their local gain does not result in a greater global loss.

Rising concerns about corporate social and environmental responsibility led to the development of sustainability accounting which emphasizes the triple bottom line: profit, people and planet. This extended emphasis does not challenge management accounting principles and methods as much as it widens the scope of what is considered relevant.

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