An increase in fixed operating costs will result in_________in the degree of operating leverage.
A) an undetermined change
B) a decrease
C) an increase
D) no change

Question

An increase in fixed operating costs will result in_________in the degree of operating leverage. 
A) an undetermined change
B) a decrease
C) an increase
D) no change

Quizplus · Accepted Answer

An increase in fixed operating costs means that the company has to spend more money on those fixed costs regardless of their level of production or sales. This means that the company will have to sell more units or generate more revenue just to break even. Therefore, an increase in fixed operating costs will result in an increase in the breakeven point, leading to higher sales volume needed to earn a profit.

An Increase in Fixed Operating Costs Will Result In_________in the Degree