Sensitivity Analysis Is a Behavioral Approach That Uses a Number

question 46

True/False

Sensitivity analysis is a behavioral approach that uses a number of possible values for a given variable to assess its impact on a firm's return.

---

Definitions:

CVP Analysis

A management accounting method used to analyze the impact of varying levels of costs and volume on operating profit.

Fixed Cost

Expenses that do not change with the volume of production or sales, such as rent, salaries, and insurance premiums.

Activity Level

The activity level is a measure of volume of work or operations, which could influence costs and operational efficiency within a business.

Activity Index

A measure used to estimate the amount of activity, effort, or work involved in a process or project.