Operating leverage is high in firms with:
Fixed Costs Variable Costs Contribution Margin Per Unit
A)small proportion high proportion high
B)high proportion small proportion high
C)small proportion high proportion low
D)high proportion small proportion low

Question

Quizplus · Accepted Answer

High operating leverage is directly related to high fixed costs and low variable costs. The contribution margin per unit should be high enough to cover the fixed costs and generate higher profits as sales increase. In choice B, the high proportion of fixed costs indicates high operating leverage, and the high contribution margin per unit indicates a strong ability to cover those costs and generate higher profits as sales increase.

Operating Leverage Is High in Firms With