Magic Realm, Incorporated, has developed a new fantasy board game. The company sold 16.200 games last year at a selling price of $62 per game. Fixed expenses associated with the game total $243,000 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 20,412 games next year (an increase