A company is considering two distinct set of circumstances that assume high inflation and low inflation. In the high inflationary set of circumstances, the price per unit will be affected as well as the variable and fixed costs. If the low-inflation set of circumstances is considered the baseline, then the analysis concerning the high inflationary circumstances could be considered
A) a sensitivity analysis.
B) a scenario analysis.
C) a Monte Carlo simulation.
D) none of the above.

Question

Quizplus · Accepted Answer

The analysis concerning the high inflationary circumstances is a scenario analysis. This is because the company is considering two distinct sets of circumstances and analyzing the potential impact of each scenario. Sensitivity analysis involves analyzing the impact of changes in one specific variable on an outcome, while Monte Carlo simulation involves using random sampling to simulate potential outcomes.

A Company Is Considering Two Distinct Set of Circumstances That