The higher the degree of operating leverage, the lower the break-even point, regardless of how it's measured.

Question

Quizplus · Accepted Answer

The degree of operating leverage does not directly determine the break-even point; it measures how a company's operating income changes with sales volume. A higher degree of operating leverage indicates a company's earnings are more sensitive to changes in sales, but the break-even point is determined by fixed costs, variable costs, and sales price, not the degree of operating leverage.

The Higher the Degree of Operating Leverage, the Lower the Break-Even