Higher fixed costs are associated with
1) higher operating leverage
2) lower operating leverage
3) increased risk
4) lower risk
A)1 and 3
B)1 and 4
C)2 and 3
D)2 and 4

Question

Higher fixed costs are associated with​
1) higher operating leverage
2) lower operating leverage
3) increased risk
4) lower risk
A)​1 and 3
B)​1 and 4
C)​2 and 3
D)​2 and 4

Quizplus · Accepted Answer

Higher fixed costs result in higher operating leverage, which can increase the risk associated with the business. This is because the business needs to sell more units to cover the fixed costs and break even. If sales do not meet expectations, the business could incur losses or may not be able to cover all of its fixed costs. This can expose the business to more risk.

Higher Fixed Costs Are Associated With​

Higher Fixed Costs Are Associated With