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Chapter $6$ Homework

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Magic Realm, Incorporated, has developed a new fantasy board game. The company sold $16,400$ games last year at a selling price of $$65$ per game. Fixed expenses associated with the game total $$246,000$ per year, and variable expenses are $$45$ per game. Production of the game is entrusted to a printing contractor. Variable expenses consist mostly of payments to this contractor.

$1$

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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 $20,664$ games next year $($an increase of $4,264$ games, or $26\%,$ over last year$).$

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Given this assumption:

a$.$ What is the expected percentage increase in net operating income for next year?

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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 $1$B

Req $2$

Prepare a contribution format income statement for the game last year.

$\backslash$table$[[$Magic Realm, Incorporated,$],[$Contribution Income Statement,,,$],[,$Total,Per Unit,$],[,,,],[,,,],[,,,]]$

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