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Ken Garrett.
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For an organisation that has more of fixed cost than variable cost like an organasation in the hotel industry, what will be the best measure of its performance. I will appreciate if the response can be both specific and generalise.
Ken Garrett
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Operating gearing is a main measure when considering fixed costs. It can be defined as Fixed costs/Total costs. Usually this is interpreted as the lower the better as the company is safer in a downturn.
Sales/fixed costs can be of use. It shows the amount of sales generated by each $ of fixed costs (high = good). Or in manufacturing you could use fixed costs/units made (low = good)
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