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QUESTION 2 Operating leverage refers to the extent of using _____. A. fixed costs B. operating...

QUESTION 2

  1. Operating leverage refers to the extent of using _____.

    A.

    fixed costs
    B.

    operating activities
    C.

    inexpensive employees
    D.

    direct costs
    E.

    debts
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Answer #1

QUESTION 2

Operating leverage refers to the extent of using fixed costs

Because operating leverage is amount of fixed cost used in operation of the business firm. It shows the proportion of the fixed cost to variable cost, if the fixed cost is more than variable cost then, the business firm has high operating leverage and if the fixed cost is less than variable cost then, the business firm has low operating leverage.The Operating leverage ratio is related to cost structure of the Company and it is calculated to contribution margin divided by the operating income.

So correct answer is option (A) or Fixed Cost

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