Evaluate the following statement: An increase in the proportion of a project's costs that are fixed will increase the degree of operating leverage for the project.

Question

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Operating leverage is the degree to which a company uses fixed costs in its cost structure. So, if a project's costs become more fixed, the company's fixed costs will be higher and therefore, the degree of operating leverage will increase. This means that a small change in sales can result in a large change in profits.

Evaluate the Following Statement: an Increase in the Proportion of a Project's