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Magic Realm, Incorporated, developed a new fantasy board game and sold 2 4 , 9 0 0 units last year at a selling price of

Magic Realm, Incorporated, developed a new fantasy board game and sold 24,900 units last year at a selling price of $67 per game.
Fixed expenses associated with the game are $415,000 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.
Management is confident that the company can sell 31,623 games next year (an increase of 6,723 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.)
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