# Sensitivity analysis?

Hi all. I have a sensitivity analysis problem that’s part of a case study that I’m trying to figure out, and since I recall reading about sensitivity analysis in FSA, thought I’d check Schweser to figure out how to tackle this problem. I checked the book, but there only seems to be a definition, and so, am hoping someone knows how to actually run through one of these problems. Here is the basic situation. Product A: Average revenue/unit = 27,000 Variable cost/unit = 22,200 Fixed cost/unit = 3,600 Potential new Product B which is an upgrade of A: Total production volume: 40,000 units Initial investment: between 75-100 million Projected demand: 5-25% of demand will be incremental to existing sales of Product A, with remainder being substitutions for existing sales. Incremental revenue/unit = 3,500 Net change in material cost = 2,000 Ok, I realize it’s a “what if” analysis, and so, I wanted to calculate the worst to best case range, but I’m having trouble figuring out how to extract the relevant info. For example, I do not really understand the incremental vs. substitution, and how to factor that in. Also, I am unclear on key components like selling price and quantity. Is the selling price irrelevant since we have per/unit revenue for Product A, and therefore, can somehow figure out per/unit revenue for the upgraded product? Since Schweser didn’t have any examples of sensitivity analysis, I’m not sure if it will directly be on L1 exam, but I can see some type of variations potentially on the exam, figuring out what happens when one variable is changed, etc. Any help you guys can provide running through this with me will be great and very appreciated. Thank you.