In a Company with Low Operating Leverage

question 116

Multiple Choice

In a company with low operating leverage:

• A)fixed costs are high and variable costs are low
• B)large changes in sales volume result in small changes in net income
• C)there is a higher possibility of net loss than a higher-leveraged firm
• D)less risk is assumed than in a highly leveraged firm

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Definitions:

Overhead Volume Variance

A metric used to measure the difference between the budgeted and actual volume of production, affecting the budgeted overhead costs.

Controllable Variance

The difference between actual and expected outcomes that can be directly managed or influenced by a responsible party.