The higher the operating leverage factor,the

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Operating leverage factor is defined as the ratio of fixed costs to total costs. A high operating leverage factor means that a relatively high proportion of costs are fixed costs. In such a situation, a small change in sales volume can cause a larger change in operating income as fixed costs do not change with fluctuations in sales volume. Therefore, the higher the operating leverage factor, the greater the impact of volume on operating income.

The Higher the Operating Leverage Factor,the