Question

Modern Artifacts can produce keepsakes that will be sold for $100 each. Nondepreciation fixed costs are $1,200 per

year, and variable costs are $80 per unit. The initial investment of $3,600 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 $13,500? (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 $21,100? (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 (Click to select)

higher

lower

 when profits are (Click to select)

higher

lower

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