The extent to which an organization's cost structure is made up of fixed costs is called its
A)fixed cost leverage.
B)operating leverage.
C)fixed cost multiple.
D)long-term leverage.

Question

Quizplus · Accepted Answer

The extent to which an organization's cost structure is made up of fixed costs is called its operating leverage.Operating leverage is the degree to which fixed costs are used in an organization's cost structure. It is calculated by dividing the contribution margin (revenue minus variable costs) by operating income (revenue minus all costs). The higher the operating leverage, the greater the impact fixed costs have on profits.

The Extent to Which an Organization's Cost Structure Is Made