Cal State LA Connect e Loose Leaf For Managerial AUX e https//newconnect.mheducation.com/flow/connect.htm D add from anywhere 囧Yahoo! 眩Apple t Disney ㄷ ESPN 멥 Imported From Safari Child Development C How to Apply for a ゆFind a Doct Saved mework 6 Help Save & Exit Sub Check my wo Magic Realm, Inc.,. has developed a new fantasy board game. The company sold 57,000 games last year at a selling price of $70 per game. Fixed expenses associated with the game total $1,045,000 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 71,820 games next year (an increase of 14,820 games, or 26%. 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 Prepare a contribution format income statement for the game last year.
|Less: Variable Cost||50||2850000|
|Less: Fixed Cost||1045000|
|1b||Operating leverage can be calculated can be calculated as|
|= Contribution Margin / Operating Income|
|= 1140000 / 95000|
|This measures how a companies operating income change with respect to changes in sales.|
|High Operating Leverage specifies high Fixed cost relative to its variable cost|