All else constant, as the variable cost per unit increases, the:

A) Contribution margin decreases.
B) Sensitivity to fixed costs decreases.
C) Degree of operating leverage decreases.
D) Operating cash flow increases.
E) Net profit increases.

Variable Cost

relates to expenses that vary directly with the level of production or business activity, such as raw materials and labor costs.

Contribution Margin

The selling price per unit minus the variable cost per unit, used to cover fixed costs and to generate profit.

Operating Cash Flow

denotes the cash generated from a company’s normal business operations, indicating whether a company can maintain and grow its operations.