Final answer:
The concept of operating leverage means that for any given change in the activity level, operating income changes proportionately more than revenues. It is a result of the existence of fixed costs, which lead to greater fluctuations in operating income relative to changes in sales volume.
Step-by-step explanation:
The concept of operating leverage refers to the effect on operating income as a result of a change in the level of sales or production volume. Specifically, operating leverage occurs when operating income changes proportionately more than revenues for any given change in the activity level. Therefore, the correct answer to the question is: a) Operating income changes proportionately more than revenues for any given change in activity level.
This happens because fixed costs do not change with an increase or decrease in sales volume in the short run. As a result, when sales increase, a larger percentage of the revenue contributes to the operating income, after covering the fixed costs. Conversely, when sales decrease, operating income can fall at a faster rate than revenues because the same fixed costs are spread over fewer sales.