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Unethical Operating Leverage

The reduction of labor costs by incurring a greater amount of fixed costs through purchase of machinery in order to increase the organization's operating leverage is unethical and should be avoided. What do you think?

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I agree, and there are two sides to this argument. If we reduce expenses by increasing our assets, we benefit the company and its shareholders. Machinery is generally quicker than human operators, so we are able to increase our production rate. This means we'll be raising gross income, and providing a greater return for our investors. However, because our purpose was to cut worker ...

Solution Summary

This solution discusses the ethics of manipulating operating leverage.