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To Manufacture, or Not to Manufacture?"  Please respond to the following: Imagine that you are the cost...

To Manufacture, or Not to Manufacture?"  Please respond to the following:

Imagine that you are the cost accounting manager and the director of your present or past organization. Management wants your opinion on whether the company should manufacture a new electric car. You informed management that you will need to perform a sensitivity analysis prior to making that decision. Compose a brief report to management explaining the importance of preparing a sensitivity report. Identify two (2) questions the sensitivity analysis should answer.

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Answer #1

Sensitivity analysis is to study, how the variation in the output of a system can be apportioned to different input parameters. In other words, sensitivity analysis tries to determine how the change of input parameters would affect the change of the output. There are many applications of sensitivity analysis to exploit the inherent knowledge of data, to quantify the uncertainty of the system, to optimize the design of a system, and to rank the influence of various parameters on the system. Thus, sensitivity analysis can provide a comprehensive understanding of the influence of the different input parameters and their variations on the model outcomes.

The goals of sensitivity analysis include (1) evaluating the influence of parameters, (2) ranking the significance of parameters based on their influence, and (3) quantifying uncertainty of the model.

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