American Bankers Association Exam CTFA Topic 8 Question 38 Discussion

Actual exam question for American Bankers Association's CTFA exam

Question #: 38
Topic #: 8

[All CTFA Questions]

In the context of operating leverage break-even analysis, if selling price per unit rises and all other variables remain constant, the operating break-even point in units will:

AFall

BRise

CStay the same

DStill be indeterminate until interest and preferred dividends paid are known

Show Suggested Answer

Suggested Answer: B

by Danica at Oct 25, 2022, 11:16 PM

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Kris

25 days ago

I'm just going to go with my gut and say the answer is A. If the price goes up, you need to sell fewer units to cover your costs, so the break-Krisn point has to fall. Simple as that, folks. Unless, of course, it's a trick question and the correct answer is actually a llama. You nKrisr know with these accounting exams.

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Marilynn

29 days ago

Hmm, I'm going to have to go with D on this one. Without knowing the interest and preferred dividends, I don't think we can definitively determine how the break-even point will change. Gotta love those tricky accounting questions!

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Graciela

3 days ago

I agree, it's always important to have all the information before drawing any conclusions.

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Shayne

19 days ago

I think you're right, we really need to consider all the variables before making a decision.

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Evangelina

1 months ago

C seems like the right answer to me. If everything else stays the same, the break-even point shouldn't change just because the selling price went up. It's still the same fixed and variable costs, just at a higher price per unit.

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Anabel

8 days ago

B) Rise

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Page

24 days ago

A) Fall

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Denae

1 months ago

I'm pretty sure the answer is B - the operating break-even point in units will rise. If the selling price goes up, you'll need to sell fewer units to cover your fixed costs, so the break-even point increases.

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Gertude

2 months ago

Well, if the selling price per unit rises and all other variables remain constant, the operating break-even point in units should fall. Basic economics tells us that when the price goes up, the quantity demanded goes down, so the break-even point must decrease.

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Terrilyn

19 days ago

That makes sense, if the price goes up, fewer units need to be sold to cover costs.

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Bulah

26 days ago

Exactly, it's all about finding that balance between price and quantity.

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Buddy

1 months ago

A) Fall

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Lettie

1 months ago

That makes sense, if the price goes up, we need to sell fewer units to break even.

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Toshia

2 months ago

I see both points, but I think the answer is B) Rise because if selling price per unit rises, we need to sell more units to cover our fixed costs, increasing the break-even point.

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Jettie

2 months ago

I disagree, I believe the answer is C) Stay the same because the operating break-even point is not affected by changes in selling price, only by changes in fixed costs and variable costs.

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Justa

2 months ago

I think the answer is A) Fall because if selling price per unit rises, we need to sell fewer units to cover our fixed costs.

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