After spilling his plate of spaghetti all over his friend's apartment floor, Kenneth rented a carpet cleaner to clean it up. In doing so, he realized just how easy it is to clean carpets! He started his own business, diving in head-first by purchasing a carpet cleaner, to make a little money. His friends are keen to use his services to clean their rented apartments before handing back keys to the landlords. Kenneth charges $70 to clean the main areas of an apartment. In addition to his equipment costs, he uses a cleaning solution on the carpet, which costs about $10 per unit cleaned. Because of his class load, Kenneth currently cleans just 4 apartments per month, but he is thinking about asking his roommate to join him so that he can increase the volume of sales. (a) At his current level of activity, Kenneth's degree of operating leverage (DOL) is 1.5. How much are his monthly fixed costs? Fixed costs $ per month (b) If Kenneth's roommate helps in this business, how much more income can the business make if sales volume increases by 50% ? (Kenneth would share his season tickets to the local NHL team with his roommate in exchange for his time.) Let's assume, instead, that the roommate thing doesn't work out. Kenneth now wants to consider other ways to increase his profit in this business. (c1) If he increases his selling price by 20% and maintains the same volume of four units per month, does it affect his DOL? (Round answer to 2 decimal places, e.g. 15.25.) Effect on DOL (c2) If so, what does this changed DOL mean for Kenneth? Operating income by a change in sales. eTextbook and Media Solution Attempts: 3 of 3 used Kenneth's friends catch word that he's thinking about raising his prices. As a result, he recognizes that his services may not be as attractive as they have been, so he plans for a decrease in sales volume by one apartment per month, given the higher selling price. (d1) How does this combination affect his DOL, if at all? (Round answer to 2 decimal places, e.g. 15.25.) Effect on DOL (d2) If his DOL changes, what does this changed DOL mean for Kenneth? Operating income by a change in sales. eTextbook and Media