Question
Modern Artifacts can produce keepsakes that will be sold for $30 each. Nondepreciation fixed costs are $400 per year, and variable costs are $20 per
Modern Artifacts can produce keepsakes that will be sold for $30 each. Nondepreciation fixed costs are $400 per year, and variable costs are $20 per unit. The initial investment of $1,200 will be depreciated straight-line over its useful life of 10 years to a final value of zero, and the discount rate is 8%.
a.What is the degree of operating leverage of Modern Artifacts when sales are $1,620?(Do not round intermediate calculations. Round your answer to 2 decimal places.)
b.What is the degree of operating leverage when sales are $2,760?(Do not round intermediate calculations. Round your answer to 2 decimal places.)
c.Why is operating leverage different at these two levels of sales?
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