What is operating leverage? The degree of operating leverage is 2.75. What does this mean?
What will be an ideal response
Operating leverage predicts the effects that fixed costs have on changes in operating income when sales volume changes. If a company has a degree of operating leverage of 2.75, then a percentage change in sales will have 2.75 times the percentage change in profits. For example, if sales increase by 10%, then profits will increase by 27.5% (2.75 x 10%).
Business
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