The higher the operating leverage factor, the

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The higher the operating leverage factor, the greater the impact of volume on operating income. This means that a small change in sales volume will result in a larger change in operating income. This is because a higher operating leverage factor indicates that a larger proportion of the company's costs are fixed, which means that these costs do not change with sales volume. As a result, any increase in sales volume will lead to a larger increase in contribution margin, as the increase in revenue is not accompanied by a corresponding increase in costs. This will lead to a greater increase in operating income, as the contribution margin provides a larger contribution to cover the fixed costs. Conversely, a decrease in sales volume will lead to a larger decrease in operating income.

The Higher the Operating Leverage Factor, the