The degree to which a firm or project relies on fixed production costs is called its:
A) Operating leverage.
B) Financial break-even.
C) Contribution margin.
D) Cost sensitivity.
E) Operating break-even

Question

Quizplus · Accepted Answer

Operating leverage measures the degree to which a firm or project relies on fixed production costs. High operating leverage means that a company has a higher proportion of fixed costs in relation to its variable costs, which can lead to higher profits with increased sales, but also higher losses if sales decline.

The Degree to Which a Firm or Project Relies on Fixed