Sensitivity Analysis

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Example of sensitivity analysis

Using scenario analysis software, you can quickly see the potential impact of a change in assumptions, without having to generate new forecasts for each budget item such as raw materials or selling and administrative costs. The following example shows how sensitivity analyses for one company might be reported.

Example of Sensitivity Analysis

What-If Scenario

Units Sold

Direct Materials Cost

Operating Income

Budget

21,400

$214,000

$383,950

Scenario 1: increase unit sales 10%:


23,540

$203,300

$360,900

Scenario 2: decrease unit sales 5%:

20,330

$6,000

$6,000

Scenario 3: decrease materials cost 5%:


21,400

$203,300

$398,700

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