Consider two businesses, High plc and Low plc. Their cost structures are as follows:

For a range of sales revenue figures, operating results would be as shown in Table 11.2.
The table shows that the more highly operationally geared, High plc, shows much greater fluctuations with alterations in the level of sales revenue than does Low plc. You will remember that we saw a similar effect with capital gearing in Table 11.1 (page 294).

Transcribed Image Text:

Fixed costs per annum Variable costs per of sales revenue High plc Low plc 100 000 50 000 0.20 0.50