Magic Realm, Inc. has developed a new fantasy board game. The company sold 15,000 games last year at a selling price of $20 per game. Fixed costs associated with the game total $182,000 per year, and variable costs are $6 per game. Production of the game is entrusted to a printing contractor. Variable costs consist mostly of payments to this contractor. Required: 1. 2. Prepare an income statement for the game last year and compute the degree of operating leverage. Management is confident that the company can sell 18,000 games next year (an increase of 3,000 games, or 20%, over last year). Compute: a. b. The expected percentage increase in net income for next year. The expected total dollar net income for next year.
Magic Realm, Inc. has developed a new fantasy board game. The company sold 15,000 games last year at a selling price of $20 per game. Fixed costs associated with the game total $182,000 per year, and variable costs are $6 per game. Production of the game is entrusted to a printing contractor. Variable costs consist mostly of payments to this contractor. Required: 1. 2. Prepare an income statement for the game last year and compute the degree of operating leverage. Management is confident that the company can sell 18,000 games next year (an increase of 3,000 games, or 20%, over last year). Compute: a. b. The expected percentage increase in net income for next year. The expected total dollar net income for next year.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![Magic Realm, Inc. has developed a new fantasy board game. The company sold 15,000 games
last year at a selling price of $20 per game. Fixed costs associated with the game total $182,000
per year, and variable costs are $6 per game. Production of the game is entrusted to a printing
contractor. Variable costs consist mostly of payments to this contractor.
Required:
1.
2.
Prepare an income statement for the game last year and compute the degree of operating
leverage.
Management is confident that the company can sell 18,000 games next year (an increase
of 3,000 games, or 20%, over last year). Compute:
a.
b.
The expected percentage increase in net income for next year.
The expected total dollar net income for next year.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Faee0d9cd-2730-4c97-b186-de60c230706d%2F89b050fe-0ed2-4140-a590-8a10dc6899c2%2Fwj07qbe_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Magic Realm, Inc. has developed a new fantasy board game. The company sold 15,000 games
last year at a selling price of $20 per game. Fixed costs associated with the game total $182,000
per year, and variable costs are $6 per game. Production of the game is entrusted to a printing
contractor. Variable costs consist mostly of payments to this contractor.
Required:
1.
2.
Prepare an income statement for the game last year and compute the degree of operating
leverage.
Management is confident that the company can sell 18,000 games next year (an increase
of 3,000 games, or 20%, over last year). Compute:
a.
b.
The expected percentage increase in net income for next year.
The expected total dollar net income for next year.
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