Final answer:
The statement that the degree of operating leverage remains the same at all sales levels is false. The degree of operating leverage varies as sales and production levels change, altering the fixed and variable costs ratio.
Step-by-step explanation:
The statement, "The degree of operating leverage remains the same at all sales levels," is false. The degree of operating leverage (DOL) measures how a company's operating income would change with a change in sales.
It is calculated at a given level of sales and indicates the sensitivity of profits to changes in sales volume. Since the DOL is dependent on fixed and variable costs, as well as the sales level, it will vary at different levels of sales, particularly because the proportion of fixed and variable costs changes with the level of production or sales.
As sales increase, the fixed costs are spread over more units, potentially increasing the DOL. Conversely, when sales fall, the leverage effect of fixed costs becomes stronger, potentially decreasing the DOL.