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Sir, how do we measure the sensitivity to the change in sales volume?
is it the contribution earned to that of the profit?I have a doubt in question no. 20 from past paper Sept 2016, wherein the investment is more sensitive to change in sales price than the sales volume.
but I have calculated the sensitivity to sales price as 29.6% and to sales volume as 84.6% (contribution/profit). Please do help me out sir!
Your sensitivities are correct – they are the same as those in the answer!!
The smaller the sensitivity then the more worried we are about changes – the more sensitive we are.
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Thank you sir!
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