All Else Being Equal,a Company with a Low Operating Leverage

question 5

Multiple Choice

All else being equal,a company with a low operating leverage will have:

• A)relatively high fixed costs.
• B)relatively high variable costs.
• C)a relatively high risk.
• D)a relatively high contribution margin ratio.

---

Definitions:

Marginal Cost

The expense incurred from manufacturing an extra unit of a product or service.

Average Total Cost

A rephrased definition: The per unit production cost calculated by dividing the sum of all production costs by the quantity of output produced.

Variable Cost

Costs that change in proportion to the level of output or activity of a business.

Fixed Costs

Expenses that do not change with the amount of goods or services produced, such as rent or salaries.