Magic Realm, Incorporated, developed a new fantasy board game and sold 47,500 units last year at a selling price of $66 per game. Fixed expenses associated with the game are $855,000 per year, and variable expenses are $46 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 61,750 games next year (an increase of 14,250 games, or 30%, 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 Management is confident that the company can sell 61,750 games next year (an increase of 14,250 games, or 30%, 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.) a. Net operating income increases by b. Total expected net operating income < Req 1B % Reg 2 > Show less A
Magic Realm, Incorporated, developed a new fantasy board game and sold 47,500 units last year at a selling price of $66 per game. Fixed expenses associated with the game are $855,000 per year, and variable expenses are $46 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 61,750 games next year (an increase of 14,250 games, or 30%, 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 Management is confident that the company can sell 61,750 games next year (an increase of 14,250 games, or 30%, 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.) a. Net operating income increases by b. Total expected net operating income < Req 1B % Reg 2 > Show less A
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Magic Realm, Incorporated, developed a new fantasy board game and sold 47,500 units last year at a selling price of $66 per game.
Fixed expenses associated with the game are $855,000 per year, and variable expenses are $46 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 61,750 games next year (an increase of 14,250 games, or 30%, 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
Management is confident that the company can sell 61,750 games next year (an increase of 14,250 games, or 30%, 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.)
a. Net operating income increases by
b. Total expected net operating income
<
Req 1B
%
Req 2 >
1
Show less A
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Step 1: What is contribution margin
VIEWStep 2: 1-a) Computation of the contribution margin income statement.
VIEWStep 3: 1-b) Computation of degree of operating leverage
VIEWStep 4: 2a) Computation of the percentage increase in net operating income
VIEWStep 5: 2b) Computation of the total expected net operating income
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