1. Which of the following statement is true?

Operating leverage refers to a company's ability to increase its sales volume while decreasing its total fixed cost.

Operating leverage may help a company increase its profitability but it cannot decrease profitability.

A company that has only variable cost cannot benefit from operating leverage.

To benefit from operating leverage a company must have both fixed and variable costs.

2. Which of the following statements is true? A mixed cost structure (part fixed and part variable) has the least risk of volatile changes in net income.

A fixed cost structure has more risk of volatile changes in net income than a company with a variable cost structure.

The risk of volatile changes in net income is not affected by a company's cost structure (fixed or variable).

A fixed cost structure has less risk of volatile changes in net income than a company with a variable cost structure.