Changes in sales can cause changes in profits. Would the profit change associated with sales changes be larger or smaller if a firm increased its operating leverage? Explain your answer.© BrainMass Inc. brainmass.com June 21, 2018, 2:51 am ad1c9bdddf
First, the degree of operating leverage (DOL) measures how much a $1 increase in revenue affects the company's operating income. DOL is measured by
Contribution margin ...
The solution examines if the profits are larger is smaller if firm increased operating leverages.