Modern Artifacts can produce keepsakes that will be sold for $250 each. Nondepreciation fixed costs are $3,000 per year, and variable costs are $150 per unit. The initial investment of $9,000 will be depreciated straight-line over its useful life of 9 years to a final value of zero, and the discount rate is 16%.
a. What is the degree of operating leverage of Modern Artifacts when sales are $11,250? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
b. What is the degree of operating leverage when sales are $19,500? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
c. Why is operating leverage different at these two levels of sales?