Question

28. Operating leverage arises because of
a. Fixed Cost of Production
b. Fixed Interest Cost
c. Variable Cost
d. Variable Interest Cost​

Answer 1

Answer:

fixed cost of production

Answer 2

Answer:

Fixed Cost of Production is the Correct Answer

Explanation:

Operating leverage:- It is a cost based 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.

Operating leverage occurs when any company has fixed costs that must be met regardless of sales volume. When the firm has fixed costs, the percentage change in profits due to changes in sales volume is greater than the percentage change in sales.

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