Operating Leverage: Understanding the Cost-Accounting Formula

To determine the sensitivity of operating income to changes in revenue (correct)

To measure the firm's profitability

To assess the efficiency of a firm's operations

To calculate a firm's tax liability

Revenue and operating income (correct)

Assets and liabilities

Market trends and competitors

Fixed costs and variable costs

Operating leverage increases as revenue increases (correct)

Operating leverage decreases as revenue increases

Operating leverage is only applicable when revenue is decreasing

Operating leverage is independent of revenue

<p>Identifying opportunities to increase operating income</p> Signup and view all the answers

<p>The degree of operating income sensitivity to revenue changes</p> Signup and view all the answers