% conversion always brings to the life your analysis/insight/recommendation. In this case, you must do the % conversion & compare apples to apples. Between A and B we would know what % of the total cost is the sub-component. 

Generally you will never be penalised for doing such conversions but obvsiouly dont do it unncessarily.

Hi Anon,

This is all about thresholds and judgment.

In the particular example you give - the differences are huge.

• The total costs of both companies are different from each other by 20-25%
• For Company A - the cost component 1 is 20% of total cost (4M/20M) while for Company B - the cost component 1 is 10% of total cost (1.6M/16M). While this still leads to the fact that cost in Company A is "higher" - your target cost will be 10% of 20M which is 2M. By your approach - the target cost would have been 1.6M which is 8% of 20M (even lower)

If your example had 200M and 196M as the total costs (same 4M difference) - then the story would have been a lot different. The "relatively" smaller difference here would not have mattered and you could have simply taken 200M as the basis for calculating percentages.

Regardless - calculating the percentages does add value to the analysis and shows that you are thinking in the right direction of comparing apples to apples.

Hope this helps!

Agrim

Hi, I would avoid it only if you can see a relevant difference/insight without running calculations

Hope it helps,
Antonello