Question

    Which of the following is a key determinant of

    operating leverage?
    A Cost of debt Correct Answer Incorrect Answer
    B The trade-off between variable cost and fixed cost Correct Answer Incorrect Answer
    C Nature of business Correct Answer Incorrect Answer
    D All of the above Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

              Operating leverage = Q(P-V)/Q (P-V) – F           Q = quantity of units sold           V = Variable cost           F = Fixe cost           P = Price per unit   Operating leverage is determined by the trade-off between variable and fixed costs.

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