Costs And Benefits Identification

Certain costs and benefits are more easily identifiable than others. For example, direct costs, such as the price of a hard disk, are easily identified from company invoice payments or canceled checks. Direct benefits often relate one-to-one to direct costs, especially savings from reducing costs in the activity in question. Other direct costs and benefits, however, may not be well defined, since they represent estimated costs or benefits that have some uncertainty. An example of such costs is reserve for bad debt. It is c discerned real cost, although its exact amount is not so immediate.

A category of costs or benefits that is not easily discernible is opportunity costs and opportunity benefits. These are the costs or benefits forgone by selecting one-alternative over another. They do not show in the organization's accounts and therefore are not easy to identify.