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What is the degree of operating leverage

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Reference no: EM133062018

Modern Artifacts can produce keepsakes that will be sold for $60 each. Nondepreciation fixed costs are $600 per year, and variable costs are $40 per unit. The initial investment of $1,800 will be depreciated straight-line over its useful life of 3 years to a final value of zero, and the discount rate is 12%.

a. What is the degree of operating leverage of Modern Artifacts when sales are $3,720?

b. What is the degree of operating leverage when sales are $7,080? (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: EM133062018

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