BPP 357

This is more from FM only a little bit in PM Operating gearing, calculated as the contribution divided by the profit before interest and tax (EBIT), is a measure of a company's fixed cost structure in relation to its variable costs. It indicates how a company's operating income will respond to changes in sales volume. A high operating gearing means that a company has a high proportion of fixed costs relative to its variable costs, which implies that changes in sales volume will have a more significant impact on the company's operating profit.