A project has fixed costs of $1,000 per yer, depreciation charges of $500 a year, sales of 5000 units a year, selling price is $1.20 per unit and variable cost is $0.80 per unit.

i) What is the break-even sales?

ii) What is degree of operating leverage?

iii) If the sales increase by 10%, what will be the change in operating profit (EBIT)?