Magic Realm, Incorporated, has developed a new fantasy board game. The company sold games last year at a selling price of
$ per game. Fixed expenses associated with the game total $ per year, and variable expenses are $ per game.
Production of the game is entrusted to a printing contractor. Variable expenses consist mostly of payments to this contractor.
Required:
a Prepare a contribution format income statement for the game last year.
b Compute the degree of operating leverage.
Management is confident that the company can sell games next year an increase of games, or 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.
Req
Req B
Prepare a contribution format income statement for the game last year.
