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Mylo is now considering investing in a speciality coffee machine. He has estimated the
following daily results for the new machine:
$
Sales (650 units) 1,300
Variable costs (845)
–––––
Contribution 455
Incremental fixed costs (70)
–––––
Profit 385
–––––Which of the following statements are true regarding the sensitivity of this
investment?
(1) The investment is more sensitive to a change in sales volume than sales price.When solving statement 1 how do we know what to put in denominator for sales price and sales volume sensitivity?
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