Question - Modern Artifacts can produce keepsakes that will be sold for $40 each. Non depreciation fixed costs are $600 per year, and variable costs are $20 per unit. The initial investment of $1,800 will be depreciated straight-line over its useful life of 9 years to a final value of zero, and the discount rate is 13%.
a. What is the degree of operating leverage of Modern Artifacts when sales are $1,800?
b. What is the degree of operating leverage when sales are $2,880?
c. Why is operating leverage different at these two levels of sales?