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COST VOLUME PROFIT ANALYSIS
Sensitivity Analysis
Sensitivity analysis is one approach for coping with changes in the values of variables. It
focuses on how a result will be changed if the original estimates or underlying assumptions
change.
What fluctuations can be absorbed before the entity makes no profit (break even).
Example:
Selling price per unit = R900
Variable cost per unit = R450
Fixed costs = R800 000
Anticipated sales volume = 15 000 units
Required:
Determine the degree to which the entity can absorb unexpected fluctuations, without
incurring losses, in the selling price per unit and the variable cost per unit.
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