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Magic Realm, Inc. has developed a new fantasy board game. The company sold 1 5 , 0 0 0 games last year at a selling
Magic Realm, Inc. has developed a new fantasy board game. The company sold games last year at a selling price of $ per game. Fixed costs associated with the game total $ per year, and variable costs are $ per game. Production of the game is entrusted to a printing contractor. Variable costs consist mostly of payments to this contractor.
Required:
Prepare an income statement for the game last year and compute the degree of operating leverage.
Management is confident that the company can sell games next year an increase of games, or over last year Compute:
a The expected percentage increase in net income for next year.
b The expected total dollar net income for next year.
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