An increase in fixed operating costs will result in ________.
A) a decrease in the degree of operating leverage
B) an increase in the degree of operating leverage
C) a decrease in the degree of financial leverage
D) an increase in the degree of financial leverage

Question

Quizplus · Accepted Answer

Fixed operating costs are a component of operating leverage, which measures the percentage change in operating income in response to a percentage change in sales. A higher fixed cost component will increase the degree of operating leverage, meaning that a company's operating income will be more sensitive to changes in sales volume.

An Increase in Fixed Operating Costs Will Result in ________