Oscar Inc. has a new product priced at $650 per unit. Variable cost is $350 per unit, and fixed costs are $300,000 per year. Quantity sold is expected to be 15,000 units per year. The new product will require an initial investment of $16 million, depreciation will be straight-line to zero for eight years, and salvage at the end of eight years is expected to be $2 million. Demand for the product is expected to be stable and to continue for eight years. The required rate of return on this new product line is 12%. What is the degree of operating leverage at the expected quantity sold of 15,000 units? Select one: a. 1.01 b. 1.03 C. 1.05 d. 1.07 e. 1.09
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