Why is operating leverage different at two levels of sales

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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%.

Problem 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.)

Problem 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.)

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

Reference no: EM132750162

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