If a company has both fixed and variable costs, their operating leverage will always be greater than 1.

Question

Quizplus · Accepted Answer

Operating leverage is calculated by dividing the contribution margin by the net income. If a company has both fixed and variable costs, the presence of fixed costs leads to a higher contribution margin and hence a higher degree of operating leverage. Therefore, the operating leverage of such a company will always be greater than 1.

If a Company Has Both Fixed and Variable Costs, Their