Operating Leverage: John Diaz is the president of Pacific Refrigeration. The company has 2,000 employees and manufactures and sells a variety of refrigeration units for commercial use. Recently, the company experienced large losses due to a downturn in the econ- omy and a subsequent decline in sales. John thinks the losses were particularly large because his company has too many fixed costs.

b. Identify a way that John can turn potential fixed costs into variable costs.