Which of the following offers the most plausible scenario for a firm that maintained a constant degree of operating leverage when its level of fixed costs doubled?
A) Depreciation expense increased.
B) Variable cost percentage decreased.
C) Sales revenues declined.
D) Pretax profits decreased.

Question

Quizplus · Accepted Answer

A decrease in the variable cost percentage would offset the increase in fixed costs, maintaining the same degree of operating leverage.

Which of the Following Offers the Most Plausible Scenario for a Firm