Changing a company's cost structure may affect

Question

Quizplus · Accepted Answer

Changing a company's cost structure can affect its operating leverage, which is the degree to which fixed costs are used in producing a product or service. A higher operating leverage means that a larger portion of costs are fixed, which can lead to a larger change in profits due to small changes in sales volume. By adjusting the cost structure to reduce fixed costs, a company can decrease its operating leverage and stabilize its profits. Changing the cost structure is less likely to directly affect the sales mix, total sales revenue, or sales volume in units.

Changing a Company's Cost Structure May Affect