The Best Way to Apply the Concept of Operating Leverage

question 9

Multiple Choice

The best way to apply the concept of operating leverage is to realize that

• A) High fixed costs compared to variable costs will always produce a higher EBIT
• B) Higher variable costs compared to fixed costs will always produce higher EBIT
• C) High fixed costs compared to variable costs will provide greater losses as sales decline than the reverse
• D) High variable costs compared to fixed costs will provide greater income as sales increase rather than the reverse
• E) High variable costs relative to fixed costs will provide greater losses as sales decline rather than the reverse

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