Magic Realm, Incorporated, has developed a new fantasy board game. The company sold 38,800 games last year at a selling price of $62 per game. Fixed expenses associated with the game total $679,000 per year, and variable expenses are $42 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 50,440 games next year (an increase of 11,640 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.)
Magic Realm, Incorporated, has developed a new fantasy board game. The company sold 38,800 games last year at a selling price of $62 per game. Fixed expenses associated with the game total $679,000 per year, and variable expenses are $42 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 50,440 games next year (an increase of 11,640 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.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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please help me in all given three subparts thanks
Transcribed Image Text:Complete this question by entering your answers in the tabs below.
Req 1A
Req 18
Req 2
Compute the degree of operating leverage.
Degree of operating leverage
< Req1A
Complete this question by entering your answers in the tabs below.
a. Net operating income increases by
b. Total expected net operating income
Reg 1A
Req 18
Req 2
Management is confident that the company can sell 50,440 games next year (an increase of 11,640 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.)
Req 2 >
< Req 18
%
Reg 2
Show less A
Transcribed Image Text:95
Magic Realm, Incorporated, has developed a new fantasy board game. The company sold 38,800 games last year at a selling price of
$62 per game. Fixed expenses associated with the game total $679,000 per year, and variable expenses are $42 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 50,440 games next year (an increase of 11,640 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.
Reg 1A
Prepare a contribution format income statement for the game last year.
Magic Realm, Incorporated
Contribution Income Statement
Req 18
Reg 2
S
Total
<
OS
0
Per Unit
Req 1A
0
Req 18
>
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