An Analysis That Reveals Whether Changing the Underlying Assumptions Would

question 90

Multiple Choice

An analysis that reveals whether changing the underlying assumptions would affect the decision is a:

• A)net present value analysis.
• B)internal rate of return analysis.
• C)payback period analysis.
• D)sensitivity analysis.

---

Definitions:

Unit Variable Cost

The cost associated with producing one unit of output, including labor, materials, and overhead, that varies directly with the level of production.

Fixed Manufacturing Costs

Costs that do not vary with the level of production output, such as rent, salaries, and insurance.

Net Income

The amount by which revenues exceed expenses.

Incremental Analysis

The process of identifying the financial data that change under alternative courses of action, often used in decision-making situations where costs and benefits need to be evaluated.