Assume only the specified parameters change in a sensitivity analysis.If the contribution margin increases by $10 per unit then operating profits will:
A)also increase by $10 per unit.
B)increase by less than $10 per unit.
C)decrease by $10 per unit.
D)be indeterminable.

Question

Quizplus · Accepted Answer

Operating profit is calculated as revenue minus total variable costs. With a $10 increase in contribution margin per unit, the revenue increase by $10 and the variable costs increase proportionately. As a result, the operating profit will also increase by $10 per unit.

Assume Only the Specified Parameters Change in a Sensitivity Analysis