MANAGEMENT

Detailed explanation-1: -Operating leverage is the extent fixed assets associated with fixed costs are being used by the firm. Operating leverage is the greatest in firms that have a relatively high proportion of fixed costs in relation to variable costs.

Detailed explanation-2: -What Is Operating Leverage? Operating leverage is a cost-accounting formula that measures the degree to which a firm or project can increase operating income by increasing revenue. A business that generates sales with a high gross margin and low variable costs has high operating leverage.

Detailed explanation-3: -Leverage is the use of fixed costs in a company’s cost structure. Fixed costs that are operating costs (such as depreciation or rent) create operating leverage. Fixed costs that are financial costs (such as interest expense) create financial leverage.

Detailed explanation-4: -Operating leverage-Extent to which an organization’s cost structure is made up of xed costs. Operating leverage is high in rms with a high proportion of xed costs and a low proportion of variable costs and results in a high contribution margin per unit.

Detailed explanation-5: -Essentially, operating leverage boils down to an analysis of fixed costs and variable costs. Operating leverage is highest in companies that have a high proportion of fixed operating costs in relation to variable operating costs. This kind of company uses more fixed assets in its operations.