Scenario analysis is different than sensitivity analysis A because no economic

# Scenario analysis is different than sensitivity

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34. Scenario analysis is different than sensitivity analysis: A. because no economic forecasts are changed.B.because several variables are changed together.C. because scenario analysis deals with actual data versus sensitivity analysis which deals with a forecast.D. because it is short and simple.E. because it is a "by the seat of the pants" technique.The Adept Co. is analyzing a proposed project. The company expects to sell 2,500 units, give or take 10%. The expected variable cost per unit is \$8 and the expected fixed costs are \$12,500. Cost estimates are considered accurate within a plus or minus 5% range. The depreciation expense is \$4,000. The sale price is estimated at \$16 a unit, give or take 2%. The company bases its sensitivity analysis on the expected case scenario.35. What is the sales revenue under the optimistic case scenario? Sales revenue for the best case = 2,500 ×1.1 ×\$16 ×1.02 = \$44,88036. What is the contribution margin under the expected case scenario? Contribution margin for the base case = \$16 - \$8 = \$811 37. What is the amount of the fixed cost per unit under the pessimistic case scenario? Fixed cost per unit for the worst case = (\$12,500 ×1.05) ÷(2,500 ×.9) = \$5.8338. The company is conducting a sensitivity analysis on the sales price using a sales price estimate of \$17. Using this value, the earnings before interest and taxes will be: A. \$4,000B.\$6,000C. \$8,500D. \$10,000E. \$18,500EBIT = [(\$17 - \$8) ×2,500] - \$12,500 - \$4,000 = \$6,00039. The company conducts a sensitivity analysis using a variable cost of \$9. The total variable cost estimate will be: Total variable cost = \$9 ×2,500 = \$22,50040. Wilson's Meats has computed its fixed costs to be \$.60 for every pound of meat it sells given an average daily sales level of 500 pounds. It charges \$3.89 per pound of top-grade ground beef. The variable cost per pound is \$2.99. What is the contribution margin per pound of ground beef sold? Contribution margin = \$3.89 - \$2.99 = \$.9012 #### You've reached the end of your free preview.

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