Discussion Post: Cost-Volume-Profit
Companies often use leverage to augment profits. Based on what you learned this week, please explain the following in detail:
1) With regards to Operating Leverage, please explain why a company with HIGH Operating Leverage faces greater financial risk in a declining sales period compared to a company with LOW Operating Leverage. (HINT: The key here is the relation between fixed costs and variable costs.)
2) What does a business's Contribution Margin represent? What does the Contribution Margin have to do with Operating Leverage?
The response must include a reference list. One-inch margins, double-space, Using Times New Roman 12 pnt font and APA style of writing and citations.