Corporate Governance - Governance, Risk, and Compliance Topic for Oracle Applications - page 54

The following screenshot shows a rolling forecast in Enterprise Performance
Management:
The primary ways of testing assumptions are sensitivity analysis and variance
analysis. For example, for a clothing manufacturer, the financial plan may be based
on pricing that assumes manufacturer's recommended price can be held for six
weeks before the change of season forces the price point to drop to 50 percent of
Manufacturer's Suggested Retail Price ( MSRP ) within four weeks and that 80
percent of manufactured volume can be sold at MSRP. The sensitivity analysis may
show that if less that 60 percent of manufactured volume is sold at MSRP the season
fails to break even. Variance Analysis would demonstrate the change in margin that
is due to changes in the planning assumptions individually.