Quantitative factors

Quantitative factors are numerical outcomes from a decision that can be measured. These factors are commonly included in various financial analyses, which are then used to evaluate a situation. Managers are typically taught to rely on quantitative factors as a large part of their decision making processes. Examples of quantitative factors are:

  • Direct labor hours. A change in the number of labor hours required to complete a task if automation is used.
  • Direct materials cost. A change in the per-unit cost of materials if a purchase is placed in a larger order volume.
  • Interest cost. The amount of additional expense that will be incurred if a loan is used to buy a fixed asset, rather than selling stock.
  • Product returns. The cost of the product returns that will occur if the decision is made to use lower-quality materials in the construction of a product.

While quantitative factors certainly should form a large part of any decision, there are other issues to consider. For example, the outcome of a decision to shut down a factory will impact the local community, which has supported the business for many years. Or, the numbers may state that a single product within a product line should be cancelled, but the company needs to present a complete product line to its customers, and so elects to retain the product.

The decision to use quantitative factors is considered more important when a large amount of funding will be deployed, since there is a greater risk of losing or at least under-utilizing the money. Quantitative factors are less important when there is less money that will be impacted by the decision.