Explain what is meant by sensitivity analysis in budgeting, and ...

[torybrooks]

Explain what is meant by sensitivity analysis in budgeting, and discuss how managers might use sensitivity analysis in practice.
 
  What will be an ideal response?

Question 2

A table is in first normal form (1NF) if it has no partial dependencies; that is, no non-key attribute is dependent on only a portion of the primary key.
  Indicate whether the statement is true or false

[uniquea123]

Answer to Question 1

Answer: Sensitivity analysis is a what-if technique that examines how results will change if the original predicted data are not achieved or if an underlying assumption changes. Managers often use financial planning models, which are mathematical representations of relationships among the factors that influence the master budget.

It is possible, using these models, to examine the financial impact of one or more parameters that influence a master budget, for example selling price and material cost. Management could consider three levels of each of these two parameters, resulting in nine scenarios of different selling prices and material costs. The financial model could then present a master budget based on each of these changes, and demonstrate the financial impact on the original data given changes in selling prices and/or material costs. Management could use these predictions to make contingency plans, change their strategies, or simply update the budgets as environmental conditions change.

Answer to Question 2

F