If a 20 percent reduction in forecast sales would not extinguish a project's profitability, then sensitivity analysis would suggest:
A)De-emphasizing that variable as a critical factor
B)Requiring a more detailed sales forecast
C)The initial sales forecasts were inflated
D)A reallocation of fixed costs to this product

Question

Quizplus · Accepted Answer

If a 20 percent reduction in forecast sales would not extinguish a project's profitability, then it indicates that the project is not highly sensitive to changes in sales, and de-emphasizing that variable as a critical factor would be appropriate. This means that other factors such as production costs, marketing, and distribution should be given more attention in the decision-making process. Requiring a more detailed sales forecast or reallocating fixed costs would not be necessary in this scenario. The initial sales forecasts being inflated is also not necessarily related to sensitivity analysis.

If a 20 Percent Reduction in Forecast Sales Would Not