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Kroger's CEO is amazed by his current cost He tells his shareholders, "Compared to other industries...

Kroger's CEO is amazed by his current cost He tells his shareholders, "Compared to other industries our variable costs are much higher relative to fixed costs." Kroger's cost structure (probably) results in a relatively:

Low contribution margin ratio and low degree of operating leverage.

Insufferable CEO
High contribution margin ratio and low degree of operating leverage.
High contribution margin ratio and high degree of operating leverage.
Low contribution margin ratio and high degree of operating leverage.
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Answer #1

Answer is

Low contribution margin ratio and low degree of operating leverage.

Increase in variable cost will decrease the contributio nmargin ratio as variable cost is the key to calculate the contribution margin ratio, as soon as it increase , contributio nmargin ratio will decrease.

Also, decrease in fixed cost or lower fixed cost will decrease the operating leverage as it contains to variables i.e. Contribution and EBIT. if there is minor difference between these two, operating leverage will be low.

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