70.2K

Verified Solution

Link Copied!

magic realm

Exercise 6-15 Operating Leverage [LO6-1, LO6-8 Magic Realm, Inc.,. has developed a new fantasy board game. The company sold 19,400 games last year at a selling price of $61 per game. Fixed expenses associated with the game total $291,000 per year, and voriable expenses are $41 per game. Production of the game is entrusted to a printing contractor. Veriable 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 23,474 games next year (an increase of 4,074 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.) Complete this question by entering your answers in the tabs below. Req 1A Req 18 Req 2 Management is confident that the company can sell 23,474 games next year (an increase of 4,074 games, or 21%, over last year). Given this assumption: 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

See Answer