The extent to which an organization uses fixed costs in its cost structure is measured by: Select one: a. contribution leverage. b. fixed cost leverage. c. efficiency leverage. d. financial leverage. e. operating leverage.

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28-06-2022
Business

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The extent to which an organization uses fixed costs in its cost structure is measured by: Select one: a. contribution leverage. b. fixed cost leverage. c. efficiency leverage. d. financial leverage. e. operating leverage.

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vtalishathapar vtalishathapar · Answer 1 · 2022-07-01T15:04:18+02:00

The correct option is E. Operating leverage occurs when an organization has a fixed cost the percentage change in profits due to changes in sales volume is greater than the percentage change in sales.

What causes Operating Leverage?

When the organization has fixed costs the percentage change in profits due to changes in sales volume is greater than the percentage change in sales.

Thus, to extent of operating leverage, the organization uses fixed costs in its cost structure.

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