Exercise 6-15 (Algo) Operating Leverage [LO6-1, LO6-8] Magic Realm, Incorporated, has developed a new fantasy board game. The company sold 42,000 games last year at a selling price of $67 per game. Fixed expenses associated with the game total $756,000 per year, and variable expenses are $47 per game. Production of the game is entrusted to a printing contractor. Variable expenses consist mostly of payments to this contractor. Required: 1-a. Prepare a contribution format income statement for the game last year. 1-b. Compute the degree of operating leverage. 2. Management is confident that the company can sell 50,400 games next year (an increase of 8,400 games, or 20%, over last year). Given this assumption: a. What is the expected percentage increase in net operating income for next year? b. What is the expected amount of net operating income for next year? (Do not prepare an income statement, use the degree of operating leverage to compute your answer) Complete this question by entering your answers in the tabs below. Req 1A Req 18 Req 2 Prepare a contribution format income statement for the game last year. Magic Realm, Incorporated, Contribution Income Statement Total Per Unit 27
Exercise 6-15 (Algo) Operating Leverage [LO6-1, LO6-8] Magic Realm, Incorporated, has developed a new fantasy board game. The company sold 42,000 games last year at a selling price of $67 per game. Fixed expenses associated with the game total $756,000 per year, and variable expenses are $47 per game. Production of the game is entrusted to a printing contractor. Variable expenses consist mostly of payments to this contractor. Required: 1-a. Prepare a contribution format income statement for the game last year. 1-b. Compute the degree of operating leverage. 2. Management is confident that the company can sell 50,400 games next year (an increase of 8,400 games, or 20%, over last year). Given this assumption: a. What is the expected percentage increase in net operating income for next year? b. What is the expected amount of net operating income for next year? (Do not prepare an income statement, use the degree of operating leverage to compute your answer) Complete this question by entering your answers in the tabs below. Req 1A Req 18 Req 2 Prepare a contribution format income statement for the game last year. Magic Realm, Incorporated, Contribution Income Statement Total Per Unit 27
Chapter1: Financial Statements And Business Decisions
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![Exercise 6-15 (Algo) Operating Leverage [LO6-1, LO6-8]
Magic Realm, Incorporated, has developed a new fantasy board game. The company sold 42,000 games last year at a selling price of
$67 per game. Fixed expenses associated with the game total $756,000 per year, and variable expenses are $47 per game.
Production of the game is entrusted to a printing contractor. Variable expenses consist mostly of payments to this contractor.
Required:
1-a. Prepare a contribution format income statement for the game last year.
1-b. Compute the degree of operating leverage.
2. Management is confident that the company can sell 50,400 games next year (an increase of 8,400 games, or 20%, over last year).
Given this assumption:
a. What is the expected percentage increase in net operating income for next year?
b. What is the expected amount of net operating income for next year? (Do not prepare an income statement, use the degree of
operating leverage to compute your answer)
Complete this question by entering your answers in the tabs below.
Req 1A
Req 18
Req 2
Prepare a contribution format income statement for the game last year.
Magic Realm, Incorporated,
Contribution Income Statement
Total
Per Unit
27](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff856c821-b509-4bcb-9246-d9e74b39483c%2F20f009a5-6596-4ee7-b3e3-5bf7672dead2%2F91kr20q_processed.png&w=3840&q=75)
Transcribed Image Text:Exercise 6-15 (Algo) Operating Leverage [LO6-1, LO6-8]
Magic Realm, Incorporated, has developed a new fantasy board game. The company sold 42,000 games last year at a selling price of
$67 per game. Fixed expenses associated with the game total $756,000 per year, and variable expenses are $47 per game.
Production of the game is entrusted to a printing contractor. Variable expenses consist mostly of payments to this contractor.
Required:
1-a. Prepare a contribution format income statement for the game last year.
1-b. Compute the degree of operating leverage.
2. Management is confident that the company can sell 50,400 games next year (an increase of 8,400 games, or 20%, over last year).
Given this assumption:
a. What is the expected percentage increase in net operating income for next year?
b. What is the expected amount of net operating income for next year? (Do not prepare an income statement, use the degree of
operating leverage to compute your answer)
Complete this question by entering your answers in the tabs below.
Req 1A
Req 18
Req 2
Prepare a contribution format income statement for the game last year.
Magic Realm, Incorporated,
Contribution Income Statement
Total
Per Unit
27
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Step 1: Introduce to income statement
VIEWStep 2: Working for contribution margin and net operating income
VIEWStep 3: Working for degree of operating leverage
VIEWStep 4: Working for percentage increase in net income if sales increases by 20%
VIEWStep 5: Working for net operating income of next year
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