Cost analysis is the process of evaluating the costs associated with a project or business operation. It helps organizations understand where their money is going and identify areas where they can save. By breaking down expenses into categories, such as materials, labor, and overhead, businesses can make informed decisions about budgeting and resource allocation. This analysis is crucial for project managers and business owners as it allows them to compare costs against potential benefits. By assessing the financial implications of different choices, they can prioritize investments that yield the best returns, ultimately leading to more efficient and profitable operations.