The slowdown of the housing market greatly affected Home Depot in 2007. A three percent decline in sales caused a twenty-one percent decline in profits is caused by operating leverage. Home Depot still had to pay their fixed costs first even though their sales had declined, the fixed costs remain the same. Since fixed costs are the lever between revenue and profitability, the fact that Home Depot was building fewer homes hurt their profitability. Home Depot’s fixed costs include salary employees and the operation of their buildings. The variable costs for Home Depot are the material they purchase to build the homes. Even though the building materials were probably purchased during the time the housing market was booming, the organization
