Firms A and B produce exactly the same products,but use different production technology.Firm A's variable costs are greater than those of Firm B,but its operating breakeven point is lower.From this information,other things held constant,we can conclude that Firm B has greater operating leverage than Firm A.

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Operating leverage is the degree to which a company uses fixed costs in its operations. A higher operating leverage means that a company has higher fixed costs relative to its variable costs. Since Firm A's variable costs are greater than those of Firm B, it implies that Firm A has lower fixed costs than Firm B. However, since Firm A's operating breakeven point is lower than that of Firm B, it suggests that Firm A has a higher contribution margin, which means that the firm can cover its fixed costs with a smaller volume of sales. Therefore, Firm A has lower operating leverage than Firm B.

Firms a and B Produce Exactly the Same Products,but Use