Which of the Following Statements Regarding Operating Leverage Is Correct

question 392

Multiple Choice

Which of the following statements regarding operating leverage is correct?

• A) All else the same, firms with high operating leverage have higher total fixed costs.
• B) It is generally easier to decrease operating leverage than it is to increase it.
• C) All else the same, operating leverage will rise as output increases.
• D) In order to calculate the degree of operating leverage all that is needed are variable costs and operating cash flows.
• E) All else the same, the degree of operating leverage rises as the price per unit is increased.

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Definitions:

Service Business

A business that provides intangible products or services to consumers instead of selling physical goods.

Transformation Processes

The sequences of actions or operations that convert inputs into finished goods or services, altering the state, composition, or condition.

Add Value

The process of increasing the worth of a product or service by improving it or adding features to it.

Inputs

The resources, raw materials, labor, and energy used in the production process to create goods or services.