Which of the following companies would most likely have a high operating leverage?
A)A landscaping company.
B)An accounting company.
C)A plumbing company.
D)A company manufacturing microprocessors.
E)None of these have high operating leverage.

Question

Quizplus · Accepted Answer

A company manufacturing microprocessors would most likely have a high operating leverage because it requires a significant investment in fixed costs such as equipment, research and development, and manufacturing facilities. Once these fixed costs are incurred, the cost of producing additional units becomes relatively low, resulting in a higher operating leverage. On the other hand, service-based businesses such as landscaping, accounting, and plumbing have lower fixed costs and are less capital intensive, resulting in a lower operating leverage.

Which of the Following Companies Would Most Likely Have a High