question archive Magic Realm, Inc
Magic Realm, Inc
Subject:AccountingPrice: Bought3
Magic Realm, Inc., has developed a new fantasy board game. The company sold 19,800 games last year at a selling price of $66 per game. Fixed expenses associated with the game total $297,000 per year, and variable expenses are $46 per game. Production of the game is entrusted to a printing contractor. Variable expenses consist mostly of payments to this contractor.
| 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 23,958 games next year (an increase of 4,158 games, or 21%, over last year). |
| a. |
Compute the expected percentage increase in net operating income for next year. |
| b. |
Compute the expected total dollar net operating income for next year. (Do not prepare an income statement; use the degree of operating leverage to compute your answer.) |
