CIMA P1 Syllabus B. Budgeting - ‘What if’ analysis - Notes
What If Analysis
Ask questions using “what if …”.
For example:
What if the Sales decrease by 20%
What if the Cost of sales increase by 10%
Steps of What-If analysis:
Defining areas of interest (e.g. Profit)
Generating questions (if) - e.g. what if cost of sales increase by 1%
Generating answers (e.g. profit will decrease by 1%)
Illustration
Revenues 100%
Variable costs (50%)
Fixed costs (20%)
Profit 30%
What If the sales volume turns to be only 70%?
Solution
Revenues 70%
Variable costs 50 x 0.70 = (35%)
Fixed costs (20%)
Profit 70 - 35 - 20 = 15%
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Syllabus B. Budgeting
B2. Preparing Forecasts
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Syllabus B. Budgeting
B2. Preparing Forecasts