Managerial Accounting

Weygandt, Kieso, & Kimmel

Prepared by
Karleen Nordquist..
The College of St. Benedict...
and St. John’s University...

with contributions by
Marianne Bradford..
The University of Tennessee...
Gregory K. Lowry….
Macon Technical Institute…..

John Wiley & Sons, Inc.

 Chapter 9

Incremental Analysis
 Chapter 9
Incremental Analysis
After studying this chapter, you should be able to:
1 Identify the steps in management’s decision-making
process.
2 Describe the concept of incremental analysis.
3 Identify the relevant costs in accepting an order at a
special price.
4 Indicate the relevant costs in a make-or-buy decision.
5 Give the decision rule in deciding whether to sell or
process materials further.
 Chapter 9
Incremental Analysis
After studying this chapter, you should be able to:
6 Identify the factors to be considered in retaining or
replacing equipment.
7 Explain the factors that are relevant in deciding
whether to eliminate an unprofitable segment.
8 Explain the term “sales mix” and its effects in
determining break-even sales.
9 Determine sales mix when a company has limited
resources.
 Preview of Chapter 9
Decision-Making Process
• Incremental Analysis Approach
• How Incremental Analysis
Works
Types of Incremental Analysis
INCREMENTAL • Accept an Order at a Special
ANALYSIS Price
• Make or Buy
• Sell or Process Further
• Retain or Replace Equipment
• Eliminate an Unprofitable
Segment
 Preview of Chapter 9

Sales Mix
• Break-even Sales
• Limited Resources
INCREMENTAL
ANALYSIS
Other Considerations
• Qualitative Factors
• Incremental Analysis and ABC
 Study Objective 1

Identify the steps in management’s

decision-making process.
 Management’s Decision-
Making Process
Management’s decision-making process
frequently involves the following steps:
1 Identify the problem and assign responsibility.
2 Determine and evaluate possible courses of
action.
3 Make a decision.
4 Review results of the decision.
 Management’s Decision-
Making Process
 In making decisions, management ordinarily
considers both financial and nonfinancial
information.
 Although nonfinancial information can be as
important as, and in some cases more important than,
financial information, the following discussion will
primarily be limited to financial information that is
relevant to decisions since that is the kind of
information accounting usually provides (primarily
in steps 2 and 4).
Study Objective 2

Describe the concept of

incremental analysis.
 Incremental Analysis
 Business decisions involve a choice among alternative courses
of action.
 The process used to identify the financial data that change under
alternative courses of action is called incremental analysis.
 In some cases, both costs and revenues will change under
alternative choices. In other cases only costs or revenues will
vary.
 It is important to recognize that
– variable costs may not change under the alternatives, and
– fixed costs may change.
 Incremental Analysis
 Incremental analysis involves not only
identifying relevant revenues and costs, but
also determining the probable effects of
decisions on future earnings.
 Data for incremental analysis often involves
estimates and uncertainty.
 Gathering data may involve market analysts,
engineers, and accountants.
 How Incremental Analysis
Works
The basic approach in incremental analysis is illustrated
in the following illustration:
Alternative Alternative Net Income
A B Increase (Decrease)
Revenues $125,000 $110,000 $(15,000)
Costs 100,000 80,000 20,000
Net income $ 25,000 $ 30,000 $ 5,000 Illustration 9-2

In this illustration, alternative B is being compared with alternative A. The

net income column shows the differences between the alternatives.
Alternative B will produce $5,000 more net income than alternative A.
 Key Cost Concepts in
Incremental Analysis
Three important cost concepts used in incremental
analysis follow:
 In incremental analysis, the only factors to be
considered are those costs and revenues that differ
across alternatives. Those factors are called
relevant. Costs and revenues that do not differ
across alternatives can be ignored when trying to
chose between alternatives.
 Key Cost Concepts in
Incremental Analysis
 Often in choosing one course of action, the company
must give up the opportunity to benefit from some
other course of action. This lost benefit is referred to
as opportunity cost.
 Costs that have already been incurred and will not be
changed or avoided by any future decision are
referred to as sunk costs. Sunk costs are not relevant
costs.
 Types of Incremental
Analysis
A number of different types of decisions involve
incremental analysis. The more common types of
decisions are whether to:
 Accept an order at a special price.
 Make or buy component parts or finished
products.
 Sell products or process them further.
 Retain or replace equipment.
 Eliminate an unprofitable business segment.
 Study Objective 3

Identify the relevant costs in

accepting an order at a special price.
 Accept an Order at a
Special Price
 Sometimes a company may have an opportunity to obtain
additional business if it is willing to make major price
concessions to a specific customer.
 An order at a special price should be accepted when the
incremental revenue from the order exceeds the incremental
costs.
 It is assumed that sales in other markets will not be affected
by the special order. If other sales were affected, the lost
sales would have to be considered in making the decision.
 If the units can be produced within existing plant capacity,
generally only variable costs will be affected.
Accept an Order at a
Special Price
To
Toillustrate,
illustrate,assume
assumethat
thatSunbelt
SunbeltCompany
Company
produces
produces100,000
100,000automatic
automaticblenders
blendersper
per
month,
month,which
whichis is80%
80%ofofplant
plantcapacity.
capacity.
Variable
Variablemanufacturing
manufacturingcosts
costsare
are$8
$8per
per
unit,
unit,and
andfixed
fixedmanufacturing
manufacturingcosts
costsare
are
$400,000,
$400,000,oror$4
$4per
perunit.
unit. The
Theblenders
blendersareare
normally
normallysold
soldtotoretailers
retailersat
at$20
$20each.
each.

Question:
Question:
Sunbelt
Sunbelthashasananoffer
offerfrom
fromMexico
MexicoCo.
Co.
to
topurchase
purchasean anadditional
additional2,000
2,000
blenders
blendersat at$11
$11per
perunit.
unit.Acceptance
Acceptance
of
ofthis
thisoffer
offerwould
wouldnotnotaffect
affectnormal
normal
sales
salesofofthe
theproduct,
product,and
andthe
the
additional
additionalunits
unitscan
canbe
bemanufactured
manufactured
without
withoutincreasing
increasingplant
plantcapacity.
capacity.
 Accept an Order at a
Special Price: Incremental Analysis
If management makes its decision on the basis of total cost per unit of $12
($8 + $4), the order would be rejected, because costs ($12) would exceed
revenues ($11) by $1 per unit. However, since the units can be produced
within existing plant capacity, the special order will not increase fixed
costs. The relevant data for the decision, therefore, are the variable
manufacturing costs per unit of $8 and the expected revenue of $11 per unit.

Reject Accept Net Income

Order Order Increase (Decrease)
Revenues $ -0- $22,000 $ 22,000
Costs -0- 16,000 (16,000)
Net income $ -0- $ 6,000 $ 6,000 Illustration 9-4

Decision:
Decision:
Sunbelt
Sunbeltwill
willincrease
increaseits
itsnet
netincome
incomeby
by$6,000
$6,000when
whenaccepting
acceptingthis
this
special
specialorder.
order.
 Study Objective 4

Indicate the relevant costs in a

make-or-buy decision.
 Make or Buy

 When a manufacturer assembles component parts

in producing a finished product, management must
decide whether to make or buy the components.
 This is often referred to as an outsourcing decision.
 If there is an opportunity to use the productive
capacity for another purpose, opportunity costs
should be considered.
 The decision to make or buy components should be
made on the basis of incremental analysis.
 Make or Buy
Assume
Assumethat
thatBaron
BaronCo.
Co.incurs
incursthe
thefollowing
following
annual
annualcosts
costsin
inproducing
producing25,000
25,000ignition
ignition
switches
switchesfor
formotor
motorscooters.
scooters.
Direct materials $ 50,000
Direct labor 75,000
Variable manufacturing overhead 40,000
Fixed manufacturing overhead 60,000
Total manufacturing costs $225,000
Total cost per unit ($225,000  25,000) $9.00

Alternatively,
Alternatively,Baron
Baronmay
maypurchase
purchasethe the
ignition
ignitionswitches
switchesfrom
fromIgnition,
Ignition,Inc.,
Inc.,at
at
aaprice
priceof
of$8
$8per
perunit.
unit.
Question:
Question:
Should
ShouldBaron
Baronmake
makeor
orbuy
buythe
the
ignition
ignitionswitches?
switches?
 Make or Buy:
Incremental Analysis
At first glance, it appears that management should buy the switches for
$8 instead of make for $9. However, a review of operations indicates
that if the switches are purchased all of Baron’s variable costs, but only
$10,000 of its fixed manufacturing costs, will be eliminated. Thus,
$50,000 of fixed costs will remain. The incremental costs are:
Net Income
Make Buy Increase (Decrease)
Direct materials $ 50,000 $ - 0 - $ 50,000
Direct labor 75,000 -0- 75,000
Variable manufacturing costs 40,000 -0- 40,000
Fixed manufacturing costs 60,000 50,000 10,000
Purchase price -0- 200,000 (200,000)
Illustration 9-6 Total annual cost $225,000 $250,000 $ (25,000)

Decision:
Decision:
Barton
BartonCompany
Companywill
willincur
incur$25,000
$25,000of
ofadditional
additionalcosts
costsby
bybuying
buyingthe
the
switches.
switches. Therefore,
Therefore,Barton
Bartonshould
shouldcontinue
continuetotomake
makethe
theswitches.
switches.
 Make or Buy with Opportunity
Cost: Incremental Analysis
Assume that through buying the switches, Baron Co. can use the
released productive capacity to generate additional income of
$28,000. This lost income is an additional cost of continuing to
make the switches in the make-or-buy decision. This opportunity
cost is added to the “Make” column, for comparison.
Net Income
Make Buy Increase (Decrease)
Total annual cost $225,000 $250,000 $(25,000)
Opportunity cost 28,000 -0- 28,000
Illustration 9-7 Total cost $225,000 $250,000 $ 3,000

Decision:
Decision:
ItItis
isnow
nowadvantageous
advantageoustotobuy
buythe
theswitches.
switches. Barton
Bartonwill
willsave
save$3,000
$3,000
worth
worthofofcosts
costswith
withthis
thisalternative.
alternative.
 Study Objective 5

Give the decision rule in deciding

whether to sell or process
materials further.
 Sell or Process Further
 Many manufacturers have the option of selling
products at a given point in the production cycle or
continuing to process with the expectation of selling
them at a higher price.
 The sell-or-process further decision should be
made on the basis of incremental analysis.
 The basic decision rule in a sell or process further
decision is: Process further as long as the
incremental revenue from such processing
exceeds the incremental processing costs.
 Sell or Process Further
Assume
Assumethat
thatWoodmasters,
Woodmasters,Inc.
Inc.makes
makestables.
tables.
The
Thecost
costto
tomanufacture
manufactureananunfinished
unfinishedtable
tableis
is
$35,
$35,computed
computedas
asfollows:
follows: Direct materials $ 15
Direct labor 10
Variable manufacturing overhead 6
Fixed manufacturing overhead 4
Total manufacturing costs $35

The
Theselling
sellingprice
priceperperunfinished
unfinishedunit
unitis
is$50.
$50.
Woodmasters
Woodmasterscurrently
currentlyhashasunused
unusedproductive
productive
capacity
capacitythat
thatisisexpected
expectedto tocontinue
continueindefinitely
indefinitelyand
and
can
canbe
beused
usedto tofinish
finishthe
thetables
tablesand
andsell
sellthem
themfor
for$60
$60
each.
each.For
Foraafinished
finishedtable
tabledirect
directmaterials
materialsandanddirect
direct
labor
laborcosts
costswill
willincrease
increase$2 $2and
and$4,
$4,respectively.
respectively.
Variable
Variableoverhead
overheadwill willincrease
increasebyby$2.40
$2.40(60%
(60%of
ofdirect
direct
labor).
labor).There
Therewill
willbe
beno
noincrease
increaseininfixed
fixedoverhead.
overhead.
Question:
Question: Should
ShouldWoodmasters
Woodmasterssell
sellthe
the
unfinished
unfinishedtables
tablesor
orprocess
processthem
themfurther?
further?
 Sell-or Process Further:
Incremental Analysis
The incremental analysis on a per unit basis is as follows:
Illustration 9-9
Process Net Income
Sell Further Increase (Decrease)
Sales per unit $50.00 $60.00 $10.00
Cost per unit
Direct materials 15.00 17.00 (2.00)
Direct labor 10.00 14.00 (4.00)
Variable manufacturing overhead 6.00 8.40 (2.40)
Fixed manufacturing overhead 4.00 4.00 -0-
Total $35.00 $43.40 $(8.40)
Net income per unit $15.00 $16.60 $ 1.60

Decision:
Decision:
ItItwould
wouldbe beadvantageous
advantageousfor forWoodmasters
Woodmastersto toprocess
processthe
thetables
tables
further.
further. In
Inthis
thiscase,
case,the
theper
perunit
unitincremental
incrementalrevenue
revenueofof$10.00
$10.00from
from
the
theadditional
additionalprocessing
processingisis$1.60
$1.60higher
higherthan
thanthe
theper
perunit
unitincremental
incremental
processing
processingcosts
costsof
of$8.40.
$8.40.
 Study Objective 6

Identify the factors to be considered

in retaining or replacing equipment.
 Retain or Replace
Equipment
 Management often has to decide whether to continue
using an asset or replace it.
 In a decision to retain or replace equipment,
management compares the costs which are affected
by the two alternatives. Generally, these are variable
manufacturing costs and the cost of the new
equipment.
 The book value of the old machine is a sunk cost
which is a cost that cannot be changed by any present
or future decision. Sunk costs are not relevant in
incremental analysis.
 Any trade-in allowance or cash disposal value of the
existing asset is relevant, however.
Retain or Replace
Equipment
Assume
Assumethat thatJeffcoat
JeffcoatCompany
Companyhas hasaa
factory
factorymachine
machinewith
withaabook
bookvalue
valueofof
$40,000
$40,000and andaaremaining
remaininguseful
usefullife
lifeof
offour
four
years.
years. AAnew newmachine
machineis isavailable
availablethat
that
costs
costs$120,000
$120,000and
andisisexpected
expectedto tohave
havezero
zero
salvage
salvagevaluevalueatatthe
theend
endof ofits
its4-year
4-yearuseful
useful
life.
life.IfIfthe
thenew
newmachine
machineis isacquired,
acquired,variable
variable
manufacturing
manufacturingcosts costsare
areexpected
expectedto to
decrease
decreasefrom from$160,000
$160,000to to$125,000
$125,000annually
annually
and
andthe theold
oldunit
unitwill
willbe
bescrapped.
scrapped.

Question:
Question:
Should
ShouldJeffcoat
JeffcoatCompany
Company
retain
retainor
orreplace
replacethe
themachine?
machine?
 Retain or Replace:
Incremental Analysis
The incremental analysis for the 4-year period is as follows:
Net Income
Retain Replace Increase (Decrease)
Variable manufacturing costs $640,000a $500,000b $140,000
New machine cost 120,000 (120,000)
Total $640,000 $620,000 $ 20,000

a
(4 years x $160,000)
b
(4 years x $125,000)
Illustration 9-10

Decision:
Decision:
In
Inthis
thiscase,
case,ititwould
wouldbe
beto
tothe
thecompany’s
company’sadvantage
advantageto
toreplace
replacethe
the
equipment.
equipment. TheThelower
lowervariable
variablemanufacturing
manufacturingcosts
costsdue
duetoto
replacement
replacementmore morethan
thanoffset
offsetthe
thecost
costof
ofthe
thenew
newequipment.
equipment.
 Study Objective 7

Explain the factors that are relevant

in deciding whether to eliminate an
unprofitable segment.
 Eliminate an Unprofitable
Segment
 Management sometimes needs to decide whether to
eliminate an unprofitable business segment.
 Again, the key is to focus on the data that change under the
alternative courses of action.
 Often fixed costs allocated to the unprofitable segment must
be absorbed by the other segments. It is possible, therefore,
for net income to decrease when an unprofitable segment is
eliminated.
 In deciding whether to eliminate an unprofitable segment,
management should choose the alternative which results in
the highest net income for the company as a whole.
Eliminate an Unprofitable
Segment

Assume
Assumethat
thatMartina
MartinaCompany
Companymanufactures
manufactures
tennis
tennisracquets
racquetsin
inthree
threemodels:
models: Pro,
Pro,Master,
Master,
and
andChamp.
Champ. Pro
Proand
andMaster
Masterare
areprofitable
profitable
lines,
lines,whereas
whereasChamp
Champoperates
operatesat
ataaloss.
loss.
Condensed
Condensedincome
incomestatement
statementdata
dataare:
are:

Pro Master Champ Total

Sales $800,000 $300,000 $100,000 $1,200,000
Variable expenses 520,000 210,000 90,000 820,000
Contribution margin 280,000 90,000 10,000 380,000
Fixed expenses 80,000 50,000 30,000 160,000
Net income $200,000 $ 40,000 $(20,000) $ 220,000

Question:
Question:
Should
Shouldthe
theChamp
Champsegment
segmentbe
beeliminated?
eliminated?
 Eliminate an Unprofitable
Segment
Although
Althoughititappears
appearsthat
thatincome
incomewould
wouldincrease
increaseififthe
the
Champ
Champlinelinewas
wasdiscontinued,
discontinued,ititis
ispossible
possibleforforincome
incometo to
decrease
decreaseififChamp
Champwas wasdiscontinued.
discontinued. TheThereason
reasonis isthat
that
the
thefixed
fixedexpense
expenseallocated
allocatedtotoChamp
Champwill willhave
havetotobebe
absorbed
absorbedby bythe
theother
otherproducts.
products.ToToillustrate,
illustrate,assume
assume
that
thatthe
the$30,000
$30,000of
offixed
fixedcosts
costsare
areallocated
allocated2/32/3to
toPro
Pro
and
and1/3
1/3to
toMaster.
Master.The
Therevised
revisedincome
incomestatement
statementdata
datais:
is:

Pro Master Total

Sales $800,000 $300,000 $1,100,000
Variable expenses 520,000 210,000 730,000
Contribution margin 280,000 90,000 370,000
Fixed expenses 100,000 60,000 160,000
Net income $200,000 $ 40,000 $ 210,000

Decision:
Decision: Total
Totalnet
netincome
incomehas
hasdecreased
decreased$10,000
$10,000($220,000
($220,000––$210,000).
$210,000).
 Unprofitable Segment:
Incremental Analysis
This result is also obtained in the following incremental
analysis:
Illustration 9-13 Net Income
Continue Eliminate Increase (Decrease
Sales $100,000 $ -0- $(100,000)
Variable expenses 90,000 -0- 90,000
Contribution margin 10,000 -0- (10,000)
Fixed expenses 30,000 30,000 -0-
Net income $(20,000) $ 30,000) $ (10,000)

Decision:
Decision:
Once
Onceagain,
again,total
totalnet
netincome
incomehashasdecreased
decreased$10,000
$10,000($220,000
($220,000––
$210,000).
$210,000).This
Thiscorresponds
correspondsto tothe
theChamp
Champsegment’s
segment’scontribution
contribution
margin.
margin. Thus,
Thus,management
managementshould
shouldnotnotdiscontinue
discontinuethe
theChamp
Champ
segment
segmentunless
unlessother
otherlines
linescan
canrecover
recoversome
someororall
allof
ofthe
the
sales/contribution
sales/contributionmargin
marginlost
lostby
bythe
thediscontinued
discontinuedsegment.
segment.
 Study Objective 8

Explain the term “sales mix” and its

effects in determining break-even sales.
 Sales Mix
 One of the assumptions of CVP analysis
(discussed in Chapter 5) is that if more than one
product is involved, the sales mix of the
products remains constant.
 Sales mix is the relative combination in which a
company’s products are sold.
 For example, if 4 chairs are sold with each table,
the sales mix of chairs to tables is 4:1.
 Break-Even Sales
Break-even sales can be computed for a mix of two or
more products by determining the weighted average
unit contribution margin of all the products.

 To illustrate, assume that Vargo Video sells both VCRs

and TVs at the following per unit data:
Unit Data VCRs TVs
Selling price $500 $800
Variable costs 300 400
Contribution margin $200 $400
Illustration 9-14
Sales mix 3 1
 Break-Even Sales
 The total contribution margin for the sales mix of
3 VCRs to 1 TV is $1,000, computed as follows:
[($200 x 3) + ($400 x 1)] = $1,000

 The weighted average unit contribution margin, which is total CM divided by the number of units in the sales mix is $250, computed as follows:
$1,000/4 units = $250
 Break-Even Formula:
Sales Mix
Then use the weighted average unit contribution margin to compute
break-even sales as follows:
 Assume Vargo Video has $200,000 of fixed costs.

Weighted
Average Unit Break-even Point
Fixed Costs
 Contribution = in Units
Margin
$200,000  $250 = 800 units
 Break-Even Sales
 Note that with a sales mix of 3:1, ¾ of the units sold will be
VCRs and ¼ will be TVs. Therefore, in order to break even,
Vargo Video must sell 600 VCRs (¾ x 800) and 200 TVs
(¼ x 800). This can be verified by the following:
Product Unit Sales x Unit CM = Total CM
VCRs 600 x $200 = $120,000
TVs 200 x 400 = 80,000
800 $200,000 Illustration 9-16

Management should continually review the company’s sales mix.

At any level of units sold, net income will be greater if more
high CM units are sold than low CM units.
 Study Objective 9

Determine sales mix when a

company has limited resources.
 Limited Resources
 When a company has limited resources (floor space, raw
materials, or machine hours), management must decide which
products to make and sell in order to maximize net income.
 In an allocation of limited resources decision, it is necessary to
find the contribution margin per unit of limited resource.
 This is obtained by dividing the contribution margin per unit of
each product by the number of units of the limited resource
required for each product.
 Production should be geared to the product with the highest
contribution margin per unit of limited resource.
Limited Resources
Assume
Assumethat
thatCollins
CollinsCo.
Co.manufactures
manufacturesdeluxe
deluxe
and
andstandard
standardpen
penand
andpencil
pencilsets.
sets. The
Thelimited
limited
resource
resourceis
ismachine
machinecapacity,
capacity,which
whichisis3,600
3,600
hours
hoursper
permonth.
month. Relevant
Relevantdata
dataconsists
consistsof:
of:

Deluxe Standard
Contribution margin per unit $8 $6
Machine hours required per unit .4 .2

Question:
Question:
Should
ShouldCollins
CollinsCo.
Co.shift
shiftits
itssales
salesmix
mix
toward
towarddeluxe
deluxeor
orstandard
standardsets?
sets?
 Limited Resources
Based
Basedononthe
theprevious
previousdata,
data,ititmight
mightappear
appearthat
thatdeluxe
deluxe
is
ismore
moreprofitable
profitablesince
sincethey
theyhave
haveaahigher
highercontribution
contribution
margin.
margin. However,
However,standard
standardsets
setstake
takefewer
fewermachine
machine
hours.
hours. Therefore,
Therefore,ititis
isnecessary
necessaryto tofind
findthe
thecontribution
contribution
margin
marginper
perunit
unitof
oflimited
limitedresource,
resource,as asshown
shownbelow:
below:

Deluxe Standard
Contribution margin per unit (a) $8 $6
Machine hours required per unit (b) .4 .2

Contribution margin per unit of

limited resource (a  b) $20 $30

Decision:
Decision: Since
Sincethe
thestandard
standardset
sethas
has
the
thehigher
highercontribution
contributionmargin
marginper
per
unit
unitof
oflimited
limitedresource,
resource,sales
salesmix
mix
should
shouldshift
shifttowards
towardsthat
thatproduct.
product.
 Limited Resources:
Incremental Analysis
This result is confirmed by the following incremental analysis:
If Produce If Produce
Deluxe Sets Standard Sets
Machine hours (a) 600 600
Contribution margin per unit of
limited resource (b) $20 $30
Illustration 9-19 Contribution margin (a x b) $12,000 $18,000

Decision:
Decision:
Once
Onceagain,
again,ititis
isclear
clearthat
thatstandard
standardsets
setsproduce
producemore
morecontribution
contribution
margin.
margin. Thus,
Thus,given
givenadequate
adequatedemand
demandforforstandard
standardsets,
sets,the
thesales
sales
mix
mixshould
shouldshift
shiftto tothat
thatproduct
productin
inorder
ordertotomaximize
maximizeCollins
Collins
Company’s
Company’sincome.
income.
 Other Considerations in
Decision Making
 In this chapter, the focus was primarily
on the quantitative (those attributes that
can be easily expressed in terms of
numbers) factors that affect a decision.
 Many of the decisions involving
incremental analysis have important
qualitative features that, while not easily
measured, should not be ignored.
 Other Considerations in
Decision Making
 It was noted in Chapter 4 that many
companies have shifted to activity-
based costing (ABC) to allocate
overhead costs to products.
 The concepts presented in this chapter
are completely consistent with the use of
ABC. In fact, ABC will result in better
identification of relevant costs, and
therefore, better incremental analysis.
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 Chapter 9
Incremental Analysis