All other things equal,a company can increase its operating leverage by converting

Question

Quizplus · Accepted Answer

By converting variable costs to fixed costs, the company increases its operating leverage. This is because fixed costs do not change regardless of the level of output, which means that any increase in sales revenue will lead to a greater increase in operating income. Conversely, any decrease in sales revenue will lead to a greater decrease in operating income. Therefore, a higher proportion of fixed costs in the cost structure of a company results in higher operating leverage.

All Other Things Equal,a Company Can Increase Its Operating Leverage