Modern Artifacts can produce keepsakes that will be sold for $240 each. Nondepreciation fixed costs are $3,600 per year, and variable costs are $140 per unit. The initial investment of $10,800 will be depreciated straight-line over its useful life of 3 years to a final value of zero, and the discount rate is 8%. a. What is the degree of operating leverage of Modern Artifacts when sales are $17,760? (Do not round Intermedlate calculatilons. Round your answer to 2 decimal places.) Degree of operating leverage b. What is the degree of operating leverage when sales are $35.280? (Do not round Intermedlate 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 when profits are

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Modern Artifacts can produce keepsakes that will be sold for $240 each. Nondepreciation fixed costs are $3,600 per year, and
variable costs are $140 per unit. The initial investment of $10,800 will be depreciated straight-line over its useful life of 3 years to a final
value of zero, and the discount rate is 8%.
a. What is the degree of operating leverage of Modern Artifacts when sales are $17,760? (Do not round Intermedlate calculatilons.
Round your answer to 2 decimal places.)
Degree of operating leverage
b. What is the degree of operating leverage when sales are $35.280? (Do not round Intermedlate 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
when profits are
Transcribed Image Text:Modern Artifacts can produce keepsakes that will be sold for $240 each. Nondepreciation fixed costs are $3,600 per year, and variable costs are $140 per unit. The initial investment of $10,800 will be depreciated straight-line over its useful life of 3 years to a final value of zero, and the discount rate is 8%. a. What is the degree of operating leverage of Modern Artifacts when sales are $17,760? (Do not round Intermedlate calculatilons. Round your answer to 2 decimal places.) Degree of operating leverage b. What is the degree of operating leverage when sales are $35.280? (Do not round Intermedlate 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 when profits are
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