Cost-effective definition

What is Cost-Effective?

A transaction is cost-effective when the greatest benefit is gained for a comparatively low price. The concept is commonly employed when choosing from a variety of investment options, so that the greatest possible return is generated in exchange for the amount invested.

Example of Cost-Effective

Here are several examples of how the cost-effective concept can be used:

• Product design. The addition of a product feature to a product design is cost-effective if the result is an increase in sales that exceeds the cost of the feature.

• Asset investment. A modest investment in a bottleneck production activity is warranted if doing so allows a business to increase the amount of throughput generated.

• Education investment. Paying for an employee training class is cost-effective if the result is a more efficient production line that produces more units.