Operating leverage different at these two levels of sales

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Modern Artifacts can produce keepsakes that will be sold for $20 each. Nondepreciation fixed costs are $200 per year, and variable costs are $10 per unit. The initial investment of $600 will be depreciated straight-line over its useful life of 6 years to a final value of zero, and the discount rate is 15%.

a. What is the degree of operating leverage of Modern Artifacts when sales are $640? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

b. What is the degree of operating leverage when sales are $1,620? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

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

Reference no: EM131832017

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