Use the information below to answer the following questions.
Jackson Bottle Yard, a recycling glass company, has supplied the following information in relation to their actual sales in 2015 and planned sales for the first quarter of 2016. Past records indicate that expected receipts collected from debtors will be: 60 per cent in the month of sale
40 per cent in the month following the sale
-Which question can be answered by using sensitivity analysis?
A) What if sales price is reduced by $10 per unit?
B) What if the credit period taken from suppliers is extended from one month to two months?
C) What if sales volume is 6% higher than expected?
D) All the questions can be answered.

Question

Use the information below to answer the following questions.
Jackson Bottle Yard, a recycling glass company, has supplied the following information in relation to their actual sales in 2015 and planned sales for the first quarter of 2016.  Past records indicate that expected receipts collected from debtors will be: 60 per cent in the month of sale
40 per cent in the month following the sale
-Which question can be answered by using sensitivity analysis?
A) What if sales price is reduced by $10 per unit? 
B) What if the credit period taken from suppliers is extended from one month to two months? 
C) What if sales volume is 6% higher than expected? 
D) All the questions can be answered.

Quizplus · Accepted Answer

Sensitivity analysis is a technique used to determine how different values of an independent variable affect a particular dependent variable under a given set of assumptions. This technique is used in a wide range of fields, from finance to environmental science. In the context of the questions provided:- A) Analyzing the impact of a reduction in sales price per unit can help understand how revenue and profit margins might change.- B) Extending the credit period taken from suppliers affects cash flow and working capital requirements, which can be analyzed through sensitivity analysis.- C) Estimating the effects of a higher sales volume than expected can help in planning for production, inventory, and resource allocation.Therefore, sensitivity analysis can be applied to all these scenarios to evaluate the impact of changes in these variables on the business's financial or operational outcomes.

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