Other things held constant,if a firm is operating at a profit and then sales increase,the degree of operating leverage will decline.

Question

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When a firm is operating at a profit and experiences an increase in sales, its fixed costs are spread over a larger number of units, reducing the proportion of fixed costs per unit. This decreases the firm's degree of operating leverage, as the firm becomes less sensitive to changes in sales volume.

Other Things Held Constant,if a Firm Is Operating at a Profit