# Modern Artifacts can produce keepsakes that will be sold for \$130 each. Nondepreciation fixed costs are \$2,000 per year, and variable costs are \$80 per unit. The initial investment of \$6,000 will be depreciated straight-line over its useful life of 3 years to a final value of zero, and the discount rate is 14%. a. What is the degree of operating leverage of Modern Artifacts when sales are \$11,050? (Do not round intermediate calculations. Round your answer to 2 decimal places.)b. What is the degree of operating leverage when sales are \$17,810? (Do not round intermediate calculations. Round your answer to 2 decimal places.)c. Why is operating leverage different at these two levels of sales?

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Modern Artifacts can produce keepsakes that will be sold for \$130 each. Nondepreciation fixed costs are \$2,000 per year, and variable costs are \$80 per unit. The initial investment of \$6,000 will be depreciated straight-line over its useful life of 3 years to a final value of zero, and the discount rate is 14%.

a. What is the degree of operating leverage of Modern Artifacts when sales are \$11,050? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

b. What is the degree of operating leverage when sales are \$17,810? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

c. Why is operating leverage different at these two levels of sales?

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a. Calculate the degree of operating leverage when sales are \$11,050 as follows:

Step 1: Calculate the total profit as follows: Step 2: Calculate the degree of operating leverage as follows: Therefore, the degree of operating leverage is 17.00.

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