Discuss three important pitfalls that occur when applying the cost-benefit principle inconsistently.

1- Do not formulate well the objectives and goals, divert attention to unimportant actions and not focus on the goals. For example: You want to obtain a new machinery for the company, but if you choose a blue color instead of black, the cost is more expensive and the manager decides to buy it in blue because it combines with the plant.

2- Dismissing certain costs and benefits related to each option, which would bring uncertainty in the future if they have to be incurred. The company's manager to lower costs, decides not to perform maintenance on the machines, which is negative because they could have a production failure.

3. Not distributing costs and benefits over time, noting that if these costs are applied at the same time, it would be difficult to make a profit. For example: It is decided to buy raw material for two years and pay cash, this would bring liquidity difficulties for the company in the future.

Explanation:

The cost-benefit principle is based on obtaining the greatest and best results at the least effort invested, those where the benefits exceed the cost are successful and on the contrary they are considered as a failure.

disadvantages of leasing a vehicle: no vehicle equity and mileage limitations

disadvantages of purchasing a vehicle: large down payment and vehicle depreciation

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