Les is concerned that his variable cost per unit projection for a project may not be reliable.Which type of analysis will best help him determine the effect that an incorrect variable cost estimate could have on the final outcome of the project?

Question

Quizplus · Accepted Answer

Sensitivity analysis is used to test how changes in variable inputs affect the outcome of a project. By conducting sensitivity analysis on variable cost estimates, Les can determine the effect they have on the project's overall profitability. This analysis will help him make an informed decision about whether the cost estimate is reliable enough to move forward with the project. Options A, B, D, and E are useful for analyzing different aspects of a project's financials but are not specifically designed to determine the effect of incorrect variable cost estimates.

Les Is Concerned That His Variable Cost Per Unit Projection