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u li Vun IUTUI UE VICINEVen sales in dollars, as well as the break-even sales for the two options. Page 379 EXERCISE 8-3 Determining Operating

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u li Vun IUTUI UE VICINEVen sales in dollars, as well as the break-even sales for the two options. Page 379 EXERCISE 8-3 Determining Operating Leverage (L01 - CC1; LO2-CC10] 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 costs associated with the game total $170,000 per year, and variable costs are $6 per game. Production of the game is entrusted to a printing contractor. Variable costs consist mostly of payments to this contractor. Required: 1. Prepare an income statement for the game last year, and compute the degree of operating leverage. 2. Management believes that the company's sales will increase by 3.000 games next year. Compute the following: a. The expected percentage increase in net income for next year. b. The expected total dollar net income for next year. (Do not prepare an income statement; use the degree of operating leverage to compute your answer.)

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