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What is Operating Leverage in Cost Analysis about?

If two companies have the same total sales and expenses but different proportions of fixed costs, the company with a higher percentage of fixed expenses will have lower operating leverage. Company A has sales of $100 and fixed costs of $30 out of total costs of $70, while Company B has fixed costs of $20 out of total costs of $70. Therefore, Company A has higher operating leverage of 2 compared to Company B

Author

Alex

Language

EN