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An entity with a higher proportion of fixed costs to variable
An entity with a higher proportion of fixed costs to variable costs compared to an entity with a lower proportion of fixed to variable costs is regarded as:
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An entity with a higher proportion of fixed costs relative to variable costs is regarded as having high operating leverage. This means that a greater portion of its costs must be incurred regardless of sales volume. Consequently, small changes in sales can lead to large changes in operating profit, making the entity more sensitive to fluctuations in demand.
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