Sensitivity Analysis Sensitivity analysis is a "what if" proposition. It answers questions about what may happen if major assumptions change or if certain predicated events do not occur. The "what if" feature allows the manager to plan for a variety of possibilities in different scenarios. As the manager of the Radiology Department, here are the assumptions: 1 There are 650 X-Rays completed and generate revenue of $85 each. 2 Variable costs amount to $65 per x-ray. 3 Fixed Costs equal 5 3,600 A. What is the Contribution Margin? B. What is the Operating Income? Show less

A target operating income contribution computation allows the manager to determine how many procedures must be performed in order to yield a particular operating income. The formula to compute this is: N = Fixed Costs + Target Operating Income Contribution Margin Per Unit . Assumptions: A. Desired (target) operating income = 5 4,370 B. Revenue per Procedure = S 185 C. Variable Cost Per Unit = S 92 D. Total Fixed Cost = 5 5,200 . Calculate the Target Operating Income