If a company would like to increase its degree of operating leverage it should:
A)increase its inventories relative to its receivables
B)increase its receivables relative to its inventories
C)increase its variable costs relative to its fixed costs
D)increase its fixed costs relative to its variable costs

Question

Quizplus · Accepted Answer

Increasing fixed costs relative to variable costs would increase the degree of operating leverage. This is because fixed costs remain constant regardless of the level of production or sales, so any increase in sales revenue will lead to a higher increase in operating income due to the higher contribution margin.

If a Company Would Like to Increase Its Degree of Operating