Magic Realm, Inc., has developed a new fantasy board game. The company sold 15,000 games last year at a selling price of $20 per game. Fixed expenses associated with the game total $182,000 per year, and variable expenses are $6 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 18,000 games next year (an increase of 3,000 games, or 20%, 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.)

Answer is not complete. Complete this question by entering your answers in the tabs below. Req 1A Reg 1B Req 2 Management is confident that the company can sell 18,000 games next year (an increase of 3,000 games, or 20%, over last year). Given this assumption: (Do not round intermediate calculations.) 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 Net operating income increases % by Total expected net operating income $ 42,000 X ( Req 1B Req2)