a new fantasy board game. The company sold 17,800 games last year at a selling p

Question

a new fantasy board game. The company sold 17,800 games last year at a selling price of $63 per per game. Production of the game. Fixed expenses associated with the game total $267,000 per year, and variable expenses are $43 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 21538 games next year (an increase of 3,738 games, on 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 state operating leverage to compute your answer) ment, use the degree of Complete this question by entering your answers in t he tabs below Req 1A Req 1B Req 2 Prepare a contribution format income statement for the game last year. Magic Realm, Inc. Contribution Income Statement Total Per Unit Req 1B )

Explanation / Answer

1)

1-b)Degree of operating leverage =contribution /net operating income

            356000/ 89000

               4

2a)expected % increase in net operating income = increase in sales * degreeof operating leverage

             = 21 *4

               = 84%

2b)Amount of net operating income =current year (1 + % increase)

        = 89000 (1+.84)

         = $ 163760

contribution Income statement Total per unit sales 1121400    [17800*63] 63 less:variable cost (765400)    [17800*43] (43_ contribution margin 356000 20 less:fixed cost (267000) net operating income 89000

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.