Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. exercise 6-15 operating leverage [lo6-1, lo6-8] ma

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

90.2K

Verified Solution

Question

Accounting

Exercise 6-15 Operating Leverage [LO6-1, LO6-8]

Magic Realm, Inc., has developed a new fantasy board game. The company sold 39,600 games last year at a selling price of $68 per game. Fixed expenses associated with the game total $693,000 per year, and variable expenses are $48 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 48,708 games next year (an increase of 9,108 games, or 23%, 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.)

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Psychology
1.2K views

Describe the Pyramid System Training Routine and give an example with a Flat Bench Press?

Finance
1.2K views

Snow Man Inc. has accounts receivable of $4,500, inventory of $1,800, sales of $135,000, and cost...

Biology
1.2K views

BIOL1000 N Biolog d My courses SC BIOL1000 N Biology 6 ved The strands of...

Biology
1.2K views

5 Lamarck believed giraffes reaching for tree leaves could stretch their necks longer over their...

Biology
1.2K views

1 0 blood may be the universal donor but people with this blood type can...

Physics
1.2K views

NCERT Pg 261 12th part 1 for reducing resistance in tran sformer why we are...

Basic Math
1.2K views

In your own words, how do you read the solution from the final simplex tableau?

Calculus
1.2K views

7e7x e7x 2 This can be transformed into a basic integral by letting Consider the...

Accounting
1.2K views

Equivalent units of production are equal to: Multiple Choice The number of whole...

Accounting
1.2K views

6. Please calculate the expected return and standard deviation based on the following scenarios

Accounting
1.2K views

The project started and your immediate supervisor asked for a field report on day 10....

Accounting
1.2K views

Support departments are sometimes called production departments because the two terms mean the same thing....