D. Cost Structure and Operating Leverage. 1. Cost structure is the 2. Cost structure can have a significant effect on 3. Operating leverage IS 4. Operating leverage is determined by a company's a. Companies with high fixed costs relative to variable costs have b. When a company's sales revenue is increasing, high operating leverage leverage is good because However, when sales are declining, too much operating leverage can 5. The degree of operating leverage provides a measure of a company's earnings Degree of operating leverage is computed by 6. A cost structure that relies on higher fixed costs, and consequently has higher operating leverage, is not necessarily bad. Operating leverage can add considerably to a company's profitability when used carefully Initial Post Fruit & Root Juices was introduced to you in the previous discussion. The Controller for Fruit & Root Juices wants to improve their pricing models and have a better understanding of their product costs. He has assigned the accounting department to work up variable costs and fixed costs for the product along with a break-even point. One of the accountants is a good friend of yours and makes the statement, "We are growing just fine. Too many cost calculations will cause confusion and besides we are short staffed and don't have time for extra work". In your discussion posting include the following as pertinent to concepts discussed in Chapters 5&6: How would you respond to the staff accountant in defense for the controller's request for cost information? Identify and explain the variable and fixed costs you expect Fruit & Root Juices to have. What are the benefits to know these costs and the break-even point? . Can this information help the company improve their company profits