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Discuss sensitivity analysis and how changes in selling price,variable costs, and fixed costs affect the contribution margin perunit and breakeven point. Discuss ways managers use informationtechnology to perform sensitivity analysis.

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Tod Thiel
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16 Jul 2019

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using sensitivity analysis

dependable drivers driving school charges $250 per student toprepare and administer written driving tests. variable costs of$100 per student include trainers' wages, study materials, andgasoline. annual fixed costs of $75,000 include the trainingfacility and fleet of cars.

Requirements

1. For each of the following independent situations, calculatethe contribution margin per unit and the breakeven point in unitsby first referring to the original data provided:

a. Breakeven point with no change in information.

b. decrease sales price to $220 per student

c. decrease variable costs to $50 per student

d. decrease fixed costs to $60,000.

2. compare the impact of changes in the sales price, variablecosts, and fixed costs on the contribution margin per unit and thebreakeven point in units.

Highway driving school charges $560 per student to prepare andadminister written and driving tests. Variable costs of $280 perstudent include trainers' wages, study materials, and gasoline.Annual fixed costs of $92400 include the training facility and thefleet of cars.

1. For each of the following independent situations, calculatethe contribution margin per unit and the breakeven point in unitsby first referring to the original data provided:

a. Breakeven point with no change in information

b. decrease sales price to $400 per student

c. decrease variable costs to $224 per student

d. decrease fixed costs to $81200

2. Compare the impact of changes in the sales price, variablecosts, and fixed costs on the contribution margin per unit and thebreakeven point in units.

General Discussion: Discuss how managers use CVP analysis in themanagement process and how they can project the profitability ofproducts and services. Define cost behavior, and provide examplesof variable, fixed, and mixed costs.

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