Modern Artifacts can produce keepsakes that will be sold for $280 each. Nondepreciation fixed costs are $4,200 per year, and variable costs are $220 per unit. The initial investment of $12,600 will be depreciated straight-line over its useful life of 6 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 $30,800?
b. What is the degree of operating leverage when sales are $57,120?