Exercise 5-15 (Algo) Operating Leverage (LO5-1, LO5-8] Magic Realm, Incorporated, has developed a new fantasy board game. The company sold 25,500 games last year at a selling price of $64 per game. Fixed expenses associated with the game total $425,000 per year, and variable expenses are $44 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 31,875 games next year (an increase of 6,375 games, or 25%, 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 Reg 1B Reg 2 Prepare a contribution format income statement for the game last year. Magic Realm, Incorporated Contribution Income Statement Total Per Unit Rea 1A Reg 1B > Exercise 5-15 (Algo) Operating Leverage (LO5-1, LO5-8] Magic Realm, Incorporated, has developed a new fantasy board game. The company sold 25,500 games last year at a selling price of $64 per game. Fixed expenses associated with the game total $425,000 per year, and variable expenses are $44 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 31,875 games next year (an increase of 6,375 games, or 25%, 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 1B Reg 2 Compute the degree of operating leverage. Degree of operating leverage Exercise 5-15 (Algo) Operating Leverage (LO5-1, LO5-8] Magic Realm, Incorporated, has developed a new fantasy board game. The company sold 25,500 games last year at a selling price of $64 per game. Fixed expenses associated with the game total $425,000 per year, and variable expenses are $44 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 31,875 games next year (an increase of 6,375 games, or 25%, 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 Reg 1B Reg 2 Management is confident that the company can sell 31,875 games next year (an increase of 6,375 games, or 25%, 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.) Show less % a. Net operating income increases by b. Total expected net operating income Req 1B Req 2 > Exercise 5A-1 (Algo) High-Low Method (LO5-10] The Cheyenne Hotel in Big Sky, Montana, has accumulated records of the total electrical costs of the hotel and the number of occupancy-days over the last year. An occupancy-day represents a room rented for one day. The hotel's business is highly seasonal, with peaks occurring during the ski season and in the summer. Occupancy- Days Month January February Electrical Costs $ 10,234 $ 10,052 $ 11,605 March April May 3,400 3,280 4,370 1,950 200 680 000 4,040 #646 4,080 2,240 1,030 1,460 2,700 1,960 June June July September October November December August $ 6,825 $ 2,380 2300 $ 6,866 $ 11,060 $ 11,100 $ 7,602 $ 3,605 $ 4,634 $ 8,974 Required: 1. Using the high-low method, estimate the fixed cost of electricity per month and the variable cost of electricity per occupancy-day. (Do not round your intermediate calculations. Round your Variable cost answer to 2 decimal places and Fixed cost element answer to nearest whole dollar amount.) Variable cost of electricity Fixed cost of electricity per occupancy-day per month 2. What other factors in addition to occupancy-days are likely to affect the variation in electrical costs from month to month? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and ,4 August September October November December 2,240 1,030 1,460 2,700 $ 11, 100 $ 7,602 $ 3,605 $ 4,634 $ 8,974 Required: 1. Using the high-low method, estimate the fixed cost of electricity per month and the variable cost of electricity per occupancy-day. (Do not round your intermediate calculations. Round your Variable cost answer to 2 decimal places and Fixed cost element answer to nearest whole dollar amount.) Variable cost of electricity Fixed cost of electricity per occupancy-day per month 2. What other factors in addition to occupancy-days are likely to affect the variation in electrical costs from month to month? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) 1 Systematic factors like guests, switching off fans and lights. ? Number of days present in a month. 2 Income taxes paid on hotel income. ? Seasonal factors like winter or summer. ? Fixed salary paid to hotel receptionist