Result
Profit sensitivity to cost
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This calculation is for informational purposes only and does not replace advice from a qualified professional. Formulas and rates may not fit your exact situation — double-check the figures before making decisions.
How it is calculated
Sensitivity = −(variable cost × volume) ÷ profit. The minus sign means profit and variable cost move in opposite directions: a 1% rise in cost lowers profit rather than raising it — unlike sensitivity to price and volume, where the relationship is direct.
The metric's absolute value is comparable to sensitivity to price but not identical: price flows entirely into revenue, while variable cost only makes up part of it, so at different price and variable cost levels per unit these two sensitivities can differ noticeably in magnitude.
The calculation assumes rising cost isn't accompanied by a change in price or sales volume — in practice, higher input costs often get passed on as a higher selling price, in which case the effect on profit is smaller than this 'all else equal' calculation shows.