If sensitivity analysis concludes that the largest impact on profits would come from changes in the sales level,then:
A) fixed costs should be traded for variable costs.
B) variable costs should be traded for fixed costs.
C) the project should not be undertaken.
D) additional marketing analysis may be beneficial before proceeding.

Question

Quizplus · Accepted Answer

If sensitivity analysis reveals that changes in sales level have the greatest impact on profits, it may be wise to conduct additional marketing analysis before proceeding with the project. This will help ensure that sales projections are accurate and the project has a strong chance of success. Choices A and B (trading fixed costs for variable costs or vice versa) would not address the issue of sales level impact on profits. Choice C (not undertaking the project) may be too extreme and should only be considered after a thorough analysis of all factors, including potential solutions to address the sales level impact on profits.

If Sensitivity Analysis Concludes That the Largest Impact on Profits