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Exercise 6-15 Operating Leverage [LO6-1, LO6-8] Magic Realm, Inc., has developed a new fantasy board...

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Exercise 6-15 Operating Leverage [LO6-1, LO6-8] Magic Realm, Inc., has developed a new fantasy board game. The coinpany sold 28,800 games last year at a selling price of $70 per game. Fixed expenses associated with the game total $480,000 per year, and variable expenses are $50 per game. Production of the game is entrusted to a printing contractor. 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 34,848 games next year (an increase of 6,048 games, or 21 %, 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) Prepare a contribution format income statement for the game last Magic Realm, Inc. Contribution Income Statement Total Per Unit Re 1A Compute the degree of operating leverage. Degree of operating leverage

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