Magic Realm, Incorporated, developed a new fantasy board game and sold $59,400$ units last year at a selling price of $$68$ per game. Fixed expenses associated with the game are $$1,089,000$ per year, and variable expenses are $$48$ 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 $75,438$ games next year $($an increase of $16,038$ 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.$)$

Answer rating: 100% (QA)

Magic Realm Incorporated Contribution Margin Income Statement Last Year Sales Revenue 59400 units 68... View the full answer