Worked examples / Overheads

Cut research and development

The saving is immediate. What is lost is next year's product, so nothing shows for a long time.

On these figures, the costs are larger

On these figures the costs come to $238,600 more than the saving.

The saving, on paper$800,000over 4 years

What it costs$1,038,600counted over the same years

On paper it is worth $800,000 over 4 years.
What it costs comes to $1,038,600: every $1 of saving costs $1.30.
It looks good for the first 12 months and turns negative in month 28.

Put in your own numbers

This is a worked example with illustrative figures, not data about any real person or company. Change any of them in the calculator and the answer changes with them.

How this answer was worked out

One-time cost	$0
Earnings lost because of it	$993,600
Side costs	$0
Cost of having to undo it, by its chance	$45,000
What it costs in all	$1,038,600
Cost per $1 of saving	$1,038,600 / $800,000 = $1.30
Result at the end	-$238,600

Every formula is written out on the formulas page.

What the calculator asks you

The expected saving each year
The one-time cost of making the change
What the thing being changed was earning
How much of it is affected, and how much of that was truly spare
Which parts of the business rely on it
The chance of having to undo it

Open the calculator

How this answer was worked out

What the calculator asks you

Related