Define sensitivity analysis. Why do managers conduct sensitivity analysis during the budget process?
What will be an ideal response?
Sensitivity analysis is a what-if technique that asks what a result will be if a predicted amount is
not achieved or if an underlying assumption changes. The master budget models the company's planned
activities, and managers pay special attention to ensure that the results of the budgeted income
statement, the budgeted balance sheet, and the budgeted statement of cash flows support key strategies.
But actual results often differ from plans, so managers need to know how budgeted income and cash
flows would change if key assumptions or predicted amounts in the master budget (a static budget) turn
out to be incorrect. Because a flexible budget is prepared for various levels of sales volume, it is useful for
sensitivity or what-if analysis and allows managers to plan for various sales levels. If managers have a
better understanding of how changes in sales and costs are likely to affect net income and cash flows,
they can react quickly if key assumptions or predicted amounts (such as sales price or sales volume)
underlying the master budget prove to be wrong.
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Answer the following statements true (T) or false (F)
1.Changing an organization’s culture does not change the behavior of the organization’s employees. 2.Successful changes in an organization’s culture typically occur over a short period of time. 3.The systems approach is seen as a way of ensuring attention to the “big picture.” 4.As long as our thinking is governed by habit, we will continue to re-create institutions as they have been.
Change It Pharmaceuticals is lacking in employee motivation. Devon, the CEO believes that his staff just needs a little push by giving them an understanding of the importance of each of their positions to the company while allowing them to also see each of their own direct impact. Each position, from product development to sales plays a crucial role in Change It Pharmaceuticals. Devon feels that giving timely information regarding their job performance and letting them know the importance of their roles to the company will improve work performance. Devon has focused on which two characteristics of the job characteristic model?
a. Skill variety and Task identity b. Feedback and Autonomy c. Task identity and Feedback d. Feedback and Task significance
Having more knowledge of organizational culture, history, and practices is an example of which of the following?
a. advantage of internal consulting b. advantage of external consulting c. disadvantage of internal consulting d. disadvantage of external consulting
In most waiting line models, customers are assumed to arrive at random intervals, based on a normal distribution
Indicate whether the statement is true or false.