The Best Way to Apply the Concept of Operating Leverage

Multiple Choice

The best way to apply the concept of operating leverage is to realize that

A) High fixed costs compared to variable costs will always produce a higher EBIT
B) Higher variable costs compared to fixed costs will always produce higher EBIT
C) High fixed costs compared to variable costs will provide greater losses as sales decline than the reverse
D) High variable costs compared to fixed costs will provide greater income as sales increase rather than the reverse
E) High variable costs relative to fixed costs will provide greater losses as sales decline rather than the reverse