An effect of fixed cost to change in operating income is classified as ___________?
Correct answer: D. operating leverage
- A. uncertain margin
- B. certain margin
- C. operating margin
- D. operating leverage
Explanation
Operating leverage describes how fixed operating costs magnify changes in operating income when sales change. A higher proportion of fixed costs generally means greater operating leverage.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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