If two companies produce the same product and have the same total sales and same total expenses,operating leverage will be lower in the company with a higher proportion of fixed expenses in its cost structure.

Question

Quizplus · Accepted Answer

Operating leverage is higher in a company with a higher proportion of fixed expenses because it indicates that a larger portion of costs do not change with sales volume, thus amplifying the effect of sales changes on operating income.

If Two Companies Produce the Same Product and Have the Same