Magic Realm, Incorporated, developed a new fantasy board game and sold 38,800 units last year at a selling price of $63 per game. Fixed expenses associated with the game are $679,000 per year, and variable expenses are $43 per game. Production of the game was outsourced to a printing contractor, so 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 49,276 games next year (an increase of 10,476 games, or 27%, 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, Incorporated Contribution Income Statement $ Total Per Unit 0 $ 0 0
Magic Realm, Incorporated, developed a new fantasy board game and sold 38,800 units last year at a selling price of $63 per game. Fixed expenses associated with the game are $679,000 per year, and variable expenses are $43 per game. Production of the game was outsourced to a printing contractor, so 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 49,276 games next year (an increase of 10,476 games, or 27%, 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, Incorporated Contribution Income Statement $ Total Per Unit 0 $ 0 0
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Magic Realm, Incorporated, developed a new fantasy board game and sold 38,800 units last year at a selling price
of $63 per game. Fixed expenses associated with the game are $679,000 per year, and variable expenses are $43
per game. Production of the game was outsourced to a printing contractor, so 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 49,276 games next year (an increase of 10,476 games, or
27%, 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, Incorporated
Contribution Income Statement
$
Total
Per Unit
0 $ 0
0
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