Modern Artifacts can produce keepsakes that will be sold for $270 each. Nondepreciation fixed costs are $3,200 per year, and variable costs are $190 per unit. The initial investment of $9,600 will be depreciated straight-line over its useful life of 8 years to a final value of zero, and the discount rate is 16%.
a.What is the degree of operating leverage of Modern Artifacts when sales are $16,740? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
b. What is the degree of operating leverage when sales are $28,890? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
c. Why is operating leverage different at these two levels of sales?
Degree of operating leverage is _____ when profits are _____.
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