Which aspects are typically examined in sensitivity analysis within CVP?

Which aspects are typically examined in sensitivity analysis within CVP?

• A. Changes in selling price, variable costs, and sales volume.
• B. Changes in tax rate and interest expense.
• C. Changes in fixed costs only.
• D. Changes in marketing slogans.

Answer: (A)

In CVP, profit depends on price, cost per unit, and the volume sold, so sensitivity analysis focuses on how profit responds when those drivers change. If selling price changes or the unit variable cost changes, the contribution margin per unit shifts, directly impacting profit. If the sales quantity changes, total contribution changes in proportion to the quantity times the contribution per unit. Since profit can be written as Profit = (P − V) × Q − FC, these three factors—selling price, variable cost per unit, and sales volume—are the ones whose variations are typically studied. Changes in tax rate or financing costs aren’t part of CVP sensitivity, and varying fixed costs alone or marketing slogans don’t capture the core CVP sensitivity drivers.

In CVP, profit depends on price, cost per unit, and the volume sold, so sensitivity analysis focuses on how profit responds when those drivers change. If selling price changes or the unit variable cost changes, the contribution margin per unit shifts, directly impacting profit. If the sales quantity changes, total contribution changes in proportion to the quantity times the contribution per unit. Since profit can be written as Profit = (P − V) × Q − FC, these three factors—selling price, variable cost per unit, and sales volume—are the ones whose variations are typically studied. Changes in tax rate or financing costs aren’t part of CVP sensitivity, and varying fixed costs alone or marketing slogans don’t capture the core CVP sensitivity drivers.