Modern Artifacts can produce keepsakes that will be sold for $40 each. No depreciation fixed costs are $600 per year, and variable costs are $20 per unit. The initial investment of $1,800 will be depreciated straight-line over its useful life of 9 years to a final value of zero, and the discount rate is 13%.
a. What is the degree of operating leverage of Modern Artifacts when sales are $1,800? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Degree of operating leverage
b. What is the degree of operating leverage when sales are $2,880? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Degree of operating leverage
c. Why is operating leverage different at these two levels of sales?
Degree of operating leverage (increasing/decreasing) is when profits are (increasing/decreasing).