Analysis of Cost Behavior When Calculating Damages Part 1: Understanding Costs; Analysis of Cost Behavior When Calculating Damages Part 2: Analyzing Avoided Costs
Business Law Today, ABA Business Law Section, November 15, 2018
Business Law Today, the digital platform for the American Bar Association's Business Law Section, has published a two-part series by Analysis Group Managing Principal Jeffrey H. Kinrich, affiliate Elizabeth A. Eccher, and Vice President James H. Rosberg. Appearing under the ABA's Business Litigation & Dispute Resolution practice area, the articles discuss concepts underlying the calculation of avoided costs (a key step in calculating lost profits), and the application of these concepts in damages analyses.
Computing lost profits requires computing not only lost sales revenues but also the resulting avoided costs that would have been required to generate those sales. This often becomes a point of contention between damages experts, leading to disagreements regarding the nature and amount of the costs associated with lost sales. In “Analysis of Cost Behavior When Calculating Damages Part 1: Understanding Costs,” the Analysis Group authors introduce important concepts relating to avoided costs. In “Analysis of Cost Behavior When Calculating Damages Part 2: Analyzing Avoided Costs,” they provide a roadmap for analyzing avoidable costs.
The two-part series was abridged and adapted from the authors' chapter “Analysis of Cost Behavior” in the book Lost Profits Damages: Principles, Methods, and Applications, edited by Everett P. Harry III and Jeffrey H. Kinrich.