Operating Break-Even Point in Units | CTFA Exam

A

In break-even analysis, the operating break-even point is the level of sales at which a company's revenues equal its total costs, resulting in zero profit. Operating leverage is the degree to which a company's costs are fixed versus variable.

In this scenario, if the selling price per unit rises while all other variables remain constant, the contribution margin per unit (i.e., the difference between selling price per unit and variable costs per unit) will increase. This increase in contribution margin per unit means that fewer units will be required to cover the company's fixed costs and reach the break-even point. Therefore, the operating break-even point in units will fall, and option A is the correct answer.

It is essential to note that the question only refers to operating leverage, which excludes interest and preferred dividends paid. As such, option D is not relevant to this scenario.