A cosmetics company is conducting a second-year review of one of its newest products. The marketing department expects that the firm will continue to earn profits from the sale of the product in the third year as it did in the past two years. Senior management, however, feels that the profit projections would vary based on other factors such as the price of the competitor's products, the actual level of sales, and the possibility of cost reductions. In other words, the senior management is undertaking _____.
A) a sensitivity analysis
B) an enumeration study
C) a benefit-cost analysis
D) a contingent valuation study
E) a strategic analysis

Question

Quizplus · Accepted Answer

The senior management is undertaking a sensitivity analysis, which involves examining how changes in certain variables (such as competitor pricing, sales volume, and costs) would affect the profitability of the product.

A Cosmetics Company Is Conducting a Second-Year Review of One