Problem $10-19$ Operating Leverage $($LO$4)$

Modern Artifacts can produce keepsakes that will be sold for $$80$ each. Nondepreciation fixed costs are $$1,000$ per year, and variable costs are $$60$ per unit. The initial investment of $$3,000$ will be depreciated straight$-$line over its useful life of $5$ 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?$

Note: Do not round intermediate calculations. Round your answer to $2$ decimal places.

Degree of operating leverage

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

Note: Do not round intermediate calculations. Round your answer to $2$ decimal places.

Degree of operating leverage

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

Degree of operating leverage is

when profits are