Which of the following statements is most correct?

Question

Quizplus · Accepted Answer

Higher fixed costs result in a larger break-even quantity, because the break-even point is the level of sales necessary to cover both fixed and variable costs. As fixed costs represent a larger portion of total costs, the break-even point increases. Option A is false because higher levels of fixed costs result in higher levels of operating leverage, as fixed costs provide a higher potential for operating income to increase with a given percentage increase in sales. Option B is also false because higher variable costs result in a lower contribution margin, as contribution margin is sales minus variable costs.

Which of the Following Statements Is Most Correct