Asked by Harish Ravalla on May 29, 2024
Verified
Which of the following statements applies to cost volume profit and sensitivity analysis?
i. Only one variable is changed.
ii. All variables are changed.
iii. One or more variables are changed.
iv. Only one set of variables need be assessed.
A) i
B) ii
C) iii
D) iv
Sensitivity Analysis
An approach to assess how different values of an independent variable can affect a particular dependent variable under a given set of assumptions.
Cost Volume Profit
A financial analysis method that helps determine the breakeven point for a business, understanding how changes in costs and volume affect a company's profit.
Variables Changed
Refers to alterations made to the elements or conditions in an experiment or model to observe different results.
- Utilize tools such as 'goal seek' analysis in making financial decisions.
Verified Answer
ZK
Zybrea KnightJun 01, 2024
Final Answer :
C
Explanation :
In both cost volume profit and sensitivity analysis, one or more variables are changed to analyze their impact on overall profitability or performance. Therefore, statement iii applies. Statement i is not necessarily true as more than one variable may be changed. Statement ii is incorrect as not all variables are changed. Statement iv is also incorrect as multiple sets of variables may need to be assessed.
Learning Objectives
- Utilize tools such as 'goal seek' analysis in making financial decisions.