If a Company Would Like to Increase Its Degree of Operating

question 119

Multiple Choice

If a company would like to increase its degree of operating leverage it should ________.

• A) increase its sales relative to its fixed costs
• B) increase its sales relative to its variable costs
• C) increase its variable costs relative to its fixed costs
• D) increase its fixed costs relative to its variable costs

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Definitions:

Marginal Cost

The swell in aggregate expenditure tied to the creation of an extra unit of a product or service.

Average Variable Cost

The variable cost (cost that changes with production volume) per unit of output, calculated by dividing total variable costs by the number of units produced.

Profit-Maximizing Level

The point of operation where a business can achieve the highest profit, typically determined by analyzing costs and revenue.

Price

The financial expectation, obligation, or contribution made in payment for something.