All other things equal, a company can increase its operating leverage by converting

Question

Quizplus · Accepted Answer

Converting variable costs to fixed costs increases a company's operating leverage as it shifts a larger proportion of the costs to fixed expenses that do not fluctuate with sales. This means that as sales increase, the company's profits increase at a faster rate, leading to higher operating leverage. Conversely, converting fixed costs to variable costs reduces operating leverage. Converting period costs to product costs or product costs to period costs does not affect operating leverage.

All Other Things Equal, a Company Can Increase Its Operating