Operating Leverage Refers to the Extent to Which an Organization's

question 6

Multiple Choice

Operating leverage refers to the extent to which an organization's cost structure is made up of:

• A) differential costs.
• B) opportunity costs.
• C) fixed costs.
• D) relevant costs.

---

Definitions:

Variable Costs

Expenses that fluctuate with changes in production output, such as raw materials, packaging, and labor directly involved in producing a product.

Allocated General Overhead

The portion of indirect costs that have been assigned to a specific product, department, or project.

Special Equipment

Custom or unique machinery or tools developed or acquired for specialized production or operational processes.

Fixed Manufacturing Overhead

The portion of manufacturing overhead costs that do not change with the level of production, such as salaries of supervisory staff and depreciation of factory equipment.