Which of the following statements about sensitivity analysis is TRUE?
A)It is a technique which is used to examine past results.
B)It can be used in CVP to show changes in operating income if variable costs per unit change.
C)It examines the relationship between production and service departments.
D)It shows the impact of a manager's behaviour.
E)It is relevant for isolating conversion costs.

Question

Quizplus · Accepted Answer

Sensitivity analysis is a technique used to show the effects of changes in various factors on the outcome of a decision. In Cost-Volume-Profit (CVP) analysis, it can be used to show the impact of changes in variable costs per unit on operating income. Therefore, option B is correct while the other options are either incorrect or irrelevant.

Which of the Following Statements About Sensitivity Analysis Is TRUE