Question: Kirkland Video Games Inc. is developing a new video game. It is the most sophisticated game on the market. It sells the video game for

Kirkland Video Games Inc. is developing a new video game. It is the most sophisticated game on the market. It sells the video game for $240 per copy. Variable costs to produce and sell the video game amount to $55 per copy. Fixed costs amount to $438,450. The company anticipates selling 430 copies of the game per month. The companys policy is to stop producing the video game as soon as a competitor comes out with a more sophisticated version.

(a)

Calculate the amount of operating income the company will earn if it takes 12 months for a competitor to produce a more sophisticated version of the video game.

Operating Income

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