How Does Scenario Analysis Differ from Sensitivity Analysis

question 85

Essay

How does scenario analysis differ from sensitivity analysis?

Analyze the marginal costs associated with increasing capacity or service.

Distinguish between fixed, variable, and total costs in business operations.

Evaluate decision-making processes in operational and financial contexts.

Understand the concept of average cost and how it is affected by changes in the quantity of units produced and workers hired.

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Definitions:

Selling Expenses

Costs incurred directly and indirectly from selling products or services, such as advertising, commissions, and shipping costs.

Merchandise

Goods bought and sold by businesses, typically in the retail industry.

Journal Entry

A journal entry is a record in the accounting books that logs a business transaction, indicating the accounts and amounts to be debited and credited.

Inventory

The total amount of goods and materials held by a business for the purpose of resale or production.