When sales price,fixed cost,variable cost,and production volume are changing simultaneously,the best approach to determining profitability is:
A) contribution margin.
B) contribution ratio.
C) sensitivity analysis.
D) equation.

Question

Quizplus · Accepted Answer

Sensitivity analysis is the best approach to determine profitability when sales price, fixed cost, variable cost, and production volume are changing simultaneously. Sensitivity analysis calculates how changes in one or more factors impact the profitability of the business. This analysis helps the management to identify the most critical factors to focus on, and make informed decisions to maximize profitability. Contribution margin and contribution ratio are useful measures of profitability, but they do not consider the impact of changing factors on profitability. The equation approach is also useful, but sensitivity analysis is a better approach when multiple factors are changing simultaneously.

When Sales Price,fixed Cost,variable Cost,and Production Volume Are Changing Simultaneously,the