Magic Realm, Inc., has developed a new fantasy board game. The company sold 52,200 games last year at a selling price of $68 per game. Fixed expenses associated with the game total $957,000 per year, and variable expenses are $48 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 65,772 games next year (an increase of 13,572 games, or 26%, 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 1B Req 2 Prepare a contribution format income statement for the game last year. Magic Realm, Inc., Contribution Income Statement Total Per Unit o $ $ Req 1A Req 1B Req 2 Compute the degree of operating leverage. Degree of operating leverage Req 1A Req 1B Req 2 Management is confident that the company can sell 65,772 games next year (an increase of 13,572 games, or 26%, 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.) Show lessA ................ a. Net operating income increases by % b. Total expected net operating income
Magic Realm, Inc., has developed a new fantasy board game. The company sold 52,200 games last year at a selling price of $68 per game. Fixed expenses associated with the game total $957,000 per year, and variable expenses are $48 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 65,772 games next year (an increase of 13,572 games, or 26%, 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 1B Req 2 Prepare a contribution format income statement for the game last year. Magic Realm, Inc., Contribution Income Statement Total Per Unit o $ $ Req 1A Req 1B Req 2 Compute the degree of operating leverage. Degree of operating leverage Req 1A Req 1B Req 2 Management is confident that the company can sell 65,772 games next year (an increase of 13,572 games, or 26%, 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.) Show lessA ................ a. Net operating income increases by % b. Total expected net operating income
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Magic Realm, Inc., has developed a new fantasy board game. The company sold 52,200 games last year at a selling price of $68 per
game. Fixed expenses associated with the game total $957,000 per year, and variable expenses are $48 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 65,772 games next year (an increase of 13,572 games, or 26%, 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 1B
Req 2
Prepare a contribution format income statement for the game last year.
Magic Realm, Inc.,
Contribution Income Statement
Total
Per Unit
$
$
Req 1A
Req 1B
Req 2
Compute the degree of operating leverage.
Degree of operating leverage
Req 1A
Req 1B
Req 2
Management is confident that the company can sell 65,772 games next year (an increase of 13,572 games, or 26%, 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.)
Show less A:
......................
Net operating income increases by
%
a.
b. Total expected net operating income
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