Question

The operating leverage decreases with an increase in sales _______________.

• A. Above the break-even point
• B. Below the break-even point
• C. Equal the break-even point
• D. None of the above

Answer 1

The correct option is A Above the break-even point

Essentially, operating leverage boils down to an analysis of fixed costs and from each additional sale if they don't have to increase costs to produce more sales made after the break-even point will generate a higher contribution to profit.

As stated above, in good times, high operating leverage can supercharge profit.