The calculation conducted in the above table mainly represents the overall cost incurred by implementing old or new loader in operations. The cost analysis conducted in the above table indicates an operating cost for old loader at $105,000, where it is only $90,000 for the new loader. This difference of $15,000 is identified in differential cost analysis, which portrays the benefits provided from the implementation of new loader. Moreover, if the Flying Airline Company waits one year for implanting the new loader, it could lose profits by $15,000 due to increased cost. Therefore, it is essential for Flying Airline Company to make the decision on increased cost incurred from operations. Patassini (2017) mentioned that cost reduction is also an appropriate measure, which is used by the company to increase their profitability.

In addition, from the evaluation it could be detected that the use of new loader is much more feasible in comparison with the old loader. Hence, the organisation should change its loader to reduce its operating cost and generate high income from operations. The decision for changing the loader needs to be conducted by the management after evaluating the cost factors indulged in the operation. In this context, Li (2015) stated that organisation with the help of cost analysis are able to identify the best possible solution for reducing their expenses and raising cash inflow. The decision of using the new loader could increase Flying Airline Company’s reserve, which could allow the management to take relevant steps in improving their operational capability. On the other hand, the use of old loader could only increase operating cost and decline the actual profits, which could be obtained by the organisation.

Reference

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Although the mainstream of current thinking in the business literature recognizes that firms should invest in environmental responsibility,
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Li, X., 2015. Accounting conservatism and the cost of capital: An international analysis. Journal of Business Finance & Accounting, 42(5-6), pp.555-582.
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