Question: The Artful Dodger has decided to sell packages of firecrackers at an upcoming parade. The packages will cost the Dodger 50 cents each. He will pay a $500 to the city for a permit to sell the firecrackers. IN addition he must purchase insurance that will cost him $100. The Dodger does not want to sell the packages himself, so he hired 5 NYU students to sell for him. The students will receive $20 each and 10 cents for each package they sell. The dodger will sell the packages for $1 each.
a. How many packages will the Dodger have to sell to break even?
b. How many packages will the Dodger have to sell to have a profit of $500?
c. What is the degree of operating leverage at the level of sales that you calculated in B?
d. Clearly state the meaning of the term operating leverage?