What Is the Cost-Performance Ratio? - Smart Capital Mind

The cost-performance ratio is an equation used to balance the cost of an item against its effectiveness. This process can help buyers with making purchasing ... JointheCommunity Subscribetoournewsletterandlearnsomethingneweveryday. WikibuyReview:AFreeToolThatSavesYouTimeandMoney Easy,NoEssayCollegeScholarships 15CreativeWaystoSaveMoneyThatActuallyWork K.C.Bruning K.C.Bruning Businessmangivingathumbs-up Thecost-performanceratioisanequationusedtobalancethecostofanitemagainstitseffectiveness.Thisprocesscanhelpbuyerswithmakingpurchasingdecisionsbyassigningrankingstoaseriesofitemsbasedonavarietyoffactors.Cost-performancecanalsobeusedtoanalyzetrendsinproduction.Itisalsoknownasprice/performanceratio. Thereareessentiallyfourmajoroutcomespossiblewhendeterminingcost-performanceratio.Themostdesirableoutcomeisthattheitemislowcost,buthighperformance.Inthemiddleofthescaleareproductsthatareeitherhighperformanceandhighcost,orlowperformanceandlowcost.Theleastdesirablerankingtendstobeforaproductthatishighcost,butlowperformance. Thesecost-performanceratiooutcomescanbechartedforincreasedclarityastowhereeachproductfallsinrelationtotheothers.Achartwithfourquadrants,withthehighperformanceproductsinthetoptwosections,thelowperformanceproductsinthelowersectionsandthelowandhighcostsontheleftandrightsidesrespectivelytendstobethemosteffective.Bychartingeachitemitispossibletobothfindthemostdesirableproductandtoanalyzetrendsinqualityandprice. Whilethecost-performanceratiocanbeausefultoolforfindingthebestqualityfortheprice,itemswithhighratiosarenotnecessarilythebesttopurchase.Particularlywithmorecomplexproducts,therecanbeelementsoutsideofbasicperformanceorpricethatmaybemoreimportant.Forthisreason,cost-performancecanbehelpfulinreachingadecision,butmaynotbetheonlyfactorconsidered. Thecost-performanceratiocanbeusedtoanalyzechangesinproductionaswell.Itcantrackvariancesincostandqualityforspecificproducts,industriesoreventhewholeeconomy.Someproductsgothroughdramaticchangesastheydevelopandareassimilatedbythepublic,whileothersremainessentiallystatic. Someproducts,suchascomputers,tendtohaveahighlyfluctuatingcost-performanceratio.Forexample,thefirstcomputerswereextremelyexpensive,buthadlimitedprocessingpower.Astechnologyhasadvanced,computershavebecomemorepowerfulandincreasinglymoreaccessibletoconsumers.Evenhomecomputersthatwereonceasignificantinvestmentcannowbepurchasedforafractionoftheiroriginalcost.Productswhicharemadeoflimitedresources,suchaspaperandfossilfuels,tendtohavestaticperformanceandasteadyincreaseinprice. YoumightalsoLike Recommended ReadersAlsoLove 26IncrediblyWealthyHollywoodStars CanYouGuessWhichTeamTheseAthletesPlayedFor? AnyAmericanShouldPassThisUSHistoryQuiz DoYouRecognizeTheStarsWhoWoreTheseIconicOutfits? TheMostBeautifulWomenForecastingtheWeather AmazingOpticalIllusionsThatWillPlayTricksonYourMind 40WeddingPictureFailsYouDon'tWanttoMiss 17InterestingMapsThatWillChangeYourWorldview RelatedArticles WhatIstheIncrementalCostEffectivenessRatio? DiscussionComments David09 January11,2012 @NathanG-Oneofthemostdepressingexperiencesforanyconsumerhasgottobegettingstuckwithaproductthatishighcost,lowperformance. Youkickyourselfathousandtimesafterdoingsomethinglikethat.OneofthebestwaysthatI’vefoundinguardingagainstthattrapisinsubscribingtoaconsumerproductreviewmagazineoratleastreadingasmanyreviewsaspossibleonline. There’susuallyenoughinformationouttherenowadaysthatyoucanconfidentlymakeagoodcost-performancedecision,atleastmostofthetime. NathanG January10,2012 @Charred-Mydadboughtoneofthefirstpersonalcomputersthatcameout.ItwasanIBMmachine,didpracticallynothingatthetime,andcost$6,000. Yetitwasstateoftheart.Wasitworth$6,000?Well,Isupposeforitsdayitwas,becausetherewasnothinglikeit,andcomputersweren’tmassproducedyet. Oncetheywere,andtechnologyimproved,costsstartedtumbling.Ithinkcomputersandpersonalelectronicsisreallyoneofthefewareaswhereyou’llfindgoodperformanceforlowtomiddleofthelinecosts. Charred January9,2012 It’salwaysbeentruethatyougetwhatyoupayfor.RarelyhaveIfoundanexceptiontothisrule.Eveninthecaseofpersonalcomputers,wheretheyhavecomedowninpriceandyetstilldelivergoodvalue,Ihavefoundthistobetrue. Someofthe$300desktopmachinesthataresoldmainlyforInternetsurfingandbasicofficeproductivityapplicationshaveproventobeveryunreliable.I’veheardstoriesofthosecomputersbreakingdownwithinsixmonths. Thatdoesn’tmeanyouneedtobuya$1,000computer,butyoushouldatleastexpecttopay$500foradecentsystem. Postyourcomments Pleaseenterthefollowingcode: Login: Forgotpassword? Register: Businessmangivingathumbs-up