One of the Problems Inherent in Sensitivity Analysis Is That

question 65

Multiple Choice

One of the problems inherent in sensitivity analysis is that:

• A) it suggests when it may be useful to spend money to get a better estimate of sales or costs.
• B) most projects are equally sensitive to all variables.
• C) it ignores any interrelationships between variables.
• D) the cost of conducting the analysis is excessive.

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Definitions:

Inventoriable Costs

Costs that are initially recorded as inventory on the balance sheet and recognized as cost of goods sold only when the inventory is sold.

Freight Charges

Costs associated with transporting goods from one location to another, often incurred by the seller to deliver goods to a customer.

Purchase Returns

Goods returned by the buyer to the seller, usually due to defects or otherwise not meeting expectations, resulting in a refund or credit.

Average Cost Method

An inventory valuation method that calculates the cost of goods sold and ending inventory based on the average cost of all similar items in inventory.