What Are Some Limitations of Average Cost Analysis?
While average cost is a useful metric, it has its limitations:
Over-Simplification: Average cost does not account for the complexities of cost structure and may oversimplify cost analysis. Not Always Reflective of Marginal Cost: Average cost may not accurately reflect the marginal cost, which is crucial for pricing decisions. Static Measure: Average cost is a static measure and does not account for dynamic market conditions.