I. Define Operating Leverage

question 107

Essay

i. Define operating leverage.
ii. The firm is planning to increase the selling price. If sales volume in units does not change, what will happen to the operating leverage factor? (Assume the firm pays no income taxes.) Explain.
iii. The firm is planning to increase fixed manufacturing costs and decrease variable manufacturing costs per unit. At the present volume of production, the total manufacturing costs will be unchanged. What will this change do to the operating leverage factor? (Assume no income taxes.) Explain.

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Definitions:

Less Information

Information that is inadequate or insufficient for making informed decisions.

Procedural Complexity

The extent to which a process or procedure involves multiple steps, stages, or components, making it difficult to navigate or complete.

Manage Process

The act of overseeing and directing a series of actions or steps to achieve a particular end.

Conflict

A situation or process in which individuals or groups perceive a threat to their needs, interests, or concerns, leading to a struggle.