Smith Company has a degree of operating leverage of 5, while an industry competitor, Johnson Company, has a degree of operating leverage of 2.Supplied with this knowledge, pick the response below that is most typical of Johnson Company.
A)high fixed costs
B)conservative
C)large commitment to plant facilities
D)greater low sales.

Question

Quizplus · Accepted Answer

A lower degree of operating leverage, like Johnson Company's, typically indicates a more conservative approach with lower fixed costs and less risk, as opposed to high fixed costs and large commitments to plant facilities.

Smith Company Has a Degree of Operating Leverage of 5