Management is considering replacing an existing sales commission compensation plan with a fixed salary plan.If the change is adopted,the company's
A)break-even point must increase.
B)margin of safety must decrease.
C)operating leverage must increase.
D)profit must increase.

Question

Quizplus · Accepted Answer

Operating leverage increases because fixed costs (like salaries) increase relative to variable costs (like sales commissions), making earnings more sensitive to changes in sales volume.

Management Is Considering Replacing an Existing Sales Commission Compensation Plan