Question

1. Which of the following best describes the term​ "sensitivity analysis"?

A.

It is an evaluation of the accuracy of the assumptions.

B.

It evaluates a​ company's financial condition by doing financial statement analysis.

C.

It is a testing technique to determine how results would differ if key assumptions are changed.

D.

It is an analysis of the emotional sensitivity of a​ company's employees.

2. A company with different segments using different software configurations can easily combine budget data of different segments to create the master budget.

True

False

3. Regarding the sales​ budget, which of the following statements is​ incorrect?

A.The level of sales affects expenses and almost all other elements of the master budget.

B.The budgeted sales are carried from the sales budget to the balance sheet.

C.The forecast of sales revenue is the cornerstone of the master budget.

D.Budgeted total sales for each product equal the sales price multiplied by the expected number of units sold.

4.When preparing the budgeted income statement of a merchandising​ company, the amount of cost of goods sold can be taken from the​ ________.

A.cost of goods sold budget

B.capital expenditures budget

C.inventory, purchases, and cost of goods sold budget

D.budgeted balance sheet

Answer 1

c. It is a testing technique to determine how results would differ if key assumptions are changed.

Sensitivity analysis analyses changes in result by changing key variables

2.False, since different configurations are used, it is difficult to combine all

3. B.The budgeted sales are carried from the sales budget to the balance sheet.

Sales is not a part of balance sheet

4. A.cost of goods sold budget