Modern Artifacts can produce keepsakes that will be sold for $80 each. Nondepreciation fixed costs are $1,000 per year and variable costs are $60 per unit If the project requires an initial investment of $3,000 and is expected to last for 5 years and the firm pays no taxes, The initial investment will be depreciated straight-line over 5 years to a final value of zero, and the discount rate is 10%.

a. What is the degree of operating leverage of Modern Artifacts when sales are $7,000?

b. What is the degree of operating leverage when sales are $12,000?

c. Why is operating leverage different at these two levels of sales?

Selling Price per unit				$ 80.00	per unit
Non-depreciation fixed cost				$ 1,000.00	per year
Variable cost				$ 60.00	per unit
Initial investment				$ 3,000.00
Project life				5.00	years
Discount rate				10.00%
Sales (a)				$ 7,000.00
Sales (b)				$ 12,000.00