Q40
When a company uses increased fixed cost for production, this is an example of what type of leverage.
A.
operating leverage
AnswerB.
financial leverage
C.
variable cost leverage
D.
combined leverage
Answer: Option A
Solution
Answer: Option A
Solution:
When a company uses increased fixed cost for production, this is an example of operating leverage. Operating leverage is a cost-accounting formula that measures the degree to which a firm or project can increase operating income by increasing revenue. A business that generates sales with a high gross margin and low variable costs has high operating leverage.