Question

When performing a sensitivity analysis if the selling price per unit is increased, then the ________.

A) per unit fixed administrative costs will increase
B) per unit direct materials purchase price will increase
C) total volume of sales will increase
D) total costs for sales commissions and other nonmanufacturing variable costs will increase

Answer 1

When performing a sensitivity analysis, increasing the selling price per unit will cause the total costs for sales commissions and other nonmanufacturing variable costs to increase.

Step-by-step explanation:

When performing a sensitivity analysis, if the selling price per unit is increased, then the total costs for sales commissions and other nonmanufacturing variable costs will increase.

This is because when the selling price per unit increases, the total revenue generated by the sales also increases. As a result, the costs associated with sales commissions and other nonmanufacturing variable costs, which are typically a percentage of the revenue, will also increase.

For example, if a company sells a product for $10 per unit and has a 5% sales commission rate, increasing the selling price to $12 per unit will result in a higher total sales commission.