Assume Only the Specified Parameters (That Is, Variables) Change in a Sensitivity

question 57

Multiple Choice

Assume only the specified parameters (that is, variables) change in a sensitivity analysis. If the contribution margin increases by $2 per unit, then operating profits will:

• A) Also increase by $2 per unit.
• B) Increase by less than $2 per unit.
• C) Decrease by $2 per unit.
• D) Increase, but by an indeterminate amount.
• E) Decrease, but by an indeterminate amount.

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Definitions:

Heuristic Shortcuts

Simple, efficient rules which people often use to form judgments and make decisions, sometimes leading to cognitive biases.

Stereotyping Heuristic

A mental shortcut that allows individuals to make quick judgments about people or situations based on generalizations or stereotypes.

Representation Heuristic

A cognitive shortcut in which judgments are made based on how much one thing resembles another.

Elimination by Aspect

A decision-making process where options are eliminated based on the absence of desired characteristics.