Cost analysis is an essential tool when deciding between different purchasing options. It involves comparing different factors such as price, weight, and quality to find the most economical choice. In our coffee example, we analyze the cost per kilogram to determine which is the better buy.
Here’s how to approach it:
- Calculate the actual cost per unit (in this case, per kilogram) for each option.
- Compare these costs to determine which option offers the best value for money.
For the coffee samples, the Paris pound's price is calculated by dividing the price by the weight: \[\frac{9}{0.5} = 18 \, \text{dollars/kilogram} \]Similarly, for the New York pound: \[\frac{7.20}{0.454} \approx 15.86 \, \text{dollars/kilogram} \]Choose the lower cost, indicating which is more economical.