The potential effect of the risk that sales will fall short of planned levels, as influenced by the relative proportion of fixed to variable manufacturing costs, can be measured by operating leverage, which is the ratio of the profit to contribution margin.

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A firm that competes on cost leadership needs CVP analysis primarily at the manufacturing stage, while a differentiating firm needs CVP analysis in the early phases of the cost life cycle.

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Sensitivity analysis refers to a variety of methods that examine how an amount changes if factors involved in predicting that amount change.

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