Answer the following questions using the information below:
Nancy's Niche sells a single product. 8,000 units were sold resulting in $80,000 of sales revenue, $20,000 of variable costs, and $10,000 of fixed costs.
-If a change is made in one parameter of CVP analysis, it is an example of:
A)sensitivity analysis
B)incremental budgeting
C)operating leverage
D)multiple cost drivers

Question

Quizplus · Accepted Answer

A change in one parameter of CVP analysis is an example of sensitivity analysis, which involves analyzing how sensitive a company's profits are to changes in certain variables such as sales volume, selling price, and variable costs. Incremental budgeting refers to a budgeting approach where the previous year's budget is used as a starting point for the current year's budget. Operating leverage refers to the extent to which a company uses fixed costs in its operations, while multiple cost drivers refer to situations where a company incurs costs from multiple sources, each with its own cost driver or cause.

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