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Questions - Essay Example When sales increase and the fixed expenses remain constant, a high OL will result to very high profits since variable expenses, for instance the cost of goods sold, will increase continuously in relation to increasing sales and the company will not incur additional costs to produce the added sales. 2. Let’s say you are developing a business plan, but decide that your OL is too high. What could you do (operationally) to lower that ratio? What common technique is available to you to solve this dilemma? Increasing variable costs and decreasing fixed costs. This is because fixed costs do not change with production/sales while variables costs are very flexible and can be controlled. Ways of converting fixed costs to variable costs include: hiring temporary workers instead of permanent workers, paying hourly wages instead of monthly salaries, increasing bonuses related to profits/sales instead of basic salary, using free technology, leasing buildings and other capital assets instead of buying them and hiring outside companies to do essential work. Reilly, Chris. Break-Even Analysis- Making it Work for Your Franchise. International Franchise Association, July 2009. Web. Feb. 15, 2015.