Which of the measures the extent to which the entity's cost function is made up of fixed costs?
A) Operating leverage.
B) Total contribution margin.
C) Margin of safety.
D) Fixed cost leverage.

Question

Quizplus · Accepted Answer

Operating leverage measures the extent to which an entity's cost function is made up of fixed costs. A higher operating leverage indicates that a larger portion of costs are fixed, which can lead to greater profits with increased sales but also higher risk if sales decline.

Which of the Measures the Extent to Which the Entity's