"EcoWear Clothing," a sustainable fashion brand, has a high degree of operating leverage due to its

substantial fixed costs associated with sustainable production methods. The company's fixed costs are

$$600,000,$ with a variable cost ratio of $0\mathrm{.}4$ and a contribution margin ratio of $0\mathrm{.}6.$

$3.$a$)$ Calculate the degree of operating leverage at a sales level of $100,000$ units.

$3.$b$)$ Analyze how a $10\%$ increase in sales would impact profits, highlighting the role of operating

leverage.

$3.$c$)$ Discuss the risks and benefits of having a high degree of operating leverage.

Deliverable:

An analytical report detailing the calculation of the degree of operating leverage and its implications for

profit with an increase in sales.