Please do questions # 1 and # 2
Number 1 is about Magic Realm and # 2 is about Menlo Company
#1
QUESTION #2
Magic Realm, Inc., has developed a new fantasy board game. The company sold 39,600 games last year at a selling price of $61 per game. Fixed expenses associated with the game total $693,000 per year, and variable expenses are $41 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 51,084 games next year (an increase of 11,484 games, or 29%, 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 1B Req 2 Prepare a contribution format income statement for the game last year. Magic Realm, Inc., Contribution Income Statement Total Per Unit 0 0 0 Req 1B Req 1A Req 2 Compute the degree of operating leverage. Degree of operating leverage Req 2 Req 1A Req 1B Management is confident that the company can sell 51,084 games next year (an increase of 11,484 games, or 29%, 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.) Show less Net operating income increases by % a. b. Total expected net operating income Menlo Company distributes a single product. The company's sales and expenses for last month follow: Per Unit $ 20 Total $ 304,000 212,800 Sales Variable expenses 14 $ 6 Contribution margin 91,200 Fixed expenses 74,400 $ 16,800 Net operating income Required: 1. What is the monthly break-even point in unit sales and in dollar sales? 2. Without resorting to computations, what is the total contribution margin at the break-even point? 3-a. How many units would have to be sold each month to attain a target profit of $36,600? 3-b. Verify your answer by preparing a contribution format income statement at the target sales level 4. Refer to the original data. Compute the company's margin of safety in both dollar and percentage terms. 5. What is the company's CM ratio? If sales increase by $77,000 per month and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase
