Question: 1. A high proportion of Company X's total costs are variable with respect to units sold; a high proportion of Company Y's total costs are fixed with respect to units sold. Which company is likely to have a higher degree of operating leverage (DOL)? Explain.
2. What is the primary weakness of the high-low method?
3. Using conventional CVP analysis, a mixed cost should be (a) disregarded, (b) treated as a fixed cost, or (c) separated into fixed and variable components.
4. Describe the behavior of a fixed cost.