Asked by Maria Arias on May 14, 2024
Verified
A low operating leverage is normal for highly automated industries.
Operating Leverage
A measure of the relative mix of a business’s variable costs and fixed costs, computed as contribution margin divided by operating income.
Highly Automated Industries
Sectors where machines and advanced technologies preponderantly perform production and operational processes, reducing human intervention.
- Understand the concept of operating leverage and its effects on profitability.
Verified Answer
AM
Antoinette McCloudMay 20, 2024
Final Answer :
False
Explanation :
Highly automated industries typically have high fixed costs due to the expensive equipment and technology required, leading to high operating leverage. Low operating leverage is more characteristic of service-oriented businesses with variable costs.
Learning Objectives
- Understand the concept of operating leverage and its effects on profitability.