fixed costs
Question
Modern Artifacts can produce keepsakes that will be sold for $90 each. Nondepreciation fixed costs are $1,300
per year, and variable costs are $50 per unit. The initial investment of $3,900 will be depreciated straight-line over its useful life of 5 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 $4,950? (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 $9,630? (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 higher/lower when profits are higher/lower. |
when profits are .
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