Businesses are said to have a high level of operating leverage if their nonfinancial fixed costs are relatively high. A cost-accounting method called operating leverage assesses how much a company or project can raise operating income by raising revenue. A company with significant operating leverage creates sales with a high gross margin and low variable costs.
Divide an entity's contribution margin by its net operating income to determine operating leverage. Fixed costs are unchanged, and the contribution margin of 70% is also unchanged. In general, strong operating leverage is preferable to low operating leverage since it enables enterprises to make significant profits on every additional sale.
To learn more about Fixed costs, click here.
https://brainly.com/question/17100497
#SPJ4
