Exercise $6-15($Algo$)$ Operating Leverage $[$LO$6-1,$ LO$6-8]$

Magic Realm, Incorporated, has developed a new fantasy board game. The company sold $32,800$ games last year at a selling price of $$62$ per game. Fixed expenses associated with the game total $$574,000$ per year, and variable expenses are $$42$ 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 $41,656$ games next year $($an increase of $8,856$ games, or $27\%,$ 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 $1$B

Req $2$

Prepare a contribution format income statement for the game last year.

$\backslash$table$[[$Magic Realm, Incorporated,$],[$Contribution Income Statement,,$],[,$Total,Per Unit$],[,,],[,,],[,,],[,,],[,,]]$