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Magic Realm, Incorporated, has developed a new fantasy board game. The company sold 15,000 games last year at selling price of $20 per game. Fixed expenses associated with the game total $182,000 per year, and variable expenses are $6 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. 2. Management is confident that the company can sell 18,000 games next year (an increase of 3,000 games, or 20%, over ast year). Given this assumption: . What is the expected percentage increase in net operating income for next year? . What is the expected amount of net operating income for next year? (Do not prepare an income statement; use the egree of operating leverage to compute your answer.)

Magic Realm, Incorporated, has developed a new fantasy board game. The company sold 15,000 games last year at a selling price of $20 per game. Fixed expenses associated with the game total $182,000 per year, and variable expenses are 56 per game. Production of the game is entrusted to a printing contractor. Variable expenses consist mostly of payments to his 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 18,000 games next year (an increase of 3,000 games, or 20%, over st year). Given this assumption: What is the expected percentage increase in net operating income for next year? What is the expected amount of net operating income for next year? (Do not prepare an income statement; use the egree of operating leverage to compute your answer.)

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