Exercise $5-15($Algo$)$ Operating Leverage $[$LO$52,$ LO$53]$

Magic Realm, Incorporated, developed a new fantasy board game and sold $8,300$ units last year at a selling price of $$67$ per game. Fixed expenses associated with the game are $$83,000$ per year, and variable expenses are $$47$ per game. Production of the game was outsourced to a printing contractor, so 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 $10,790$ games next year $($an increase of $2,490$ games, or $30\%,$ 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.$)$