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Magic Realm, Incorporated, has developed a new fantasy board game. The company sold 49,500 games last year at a selling price of $69 per game. Fixed expenses associated with the game total $891,000 per year, and variable expenses are $49 per game. Production of the game is entrusted to a printing contractor. Varlable expenses consist mostly of payments to this contractor. Prepare a contribution format income statement for the game last year. 1-b. Compute the degree of operating leverage.
Magic Realm, Incorporated, has developed a new fantasy board game. The company sold 49,500 games last year at a selling price of $69 per game. Fixed expenses associated with the game total $891,000 per year, and variable expenses are $49 per game. Production of the game is entrusted to a printing contractor. Varlable expenses consist mostly of payments to this contractor. Prepare a contribution format income statement for the game last year. 1-b. Compute the degree of operating leverage.
Final answer:To prepare a contribution format income statement forMagic Realm, Incorporated's fantasy board game, calculate the total revenue, total variable expenses, and contribution margin. Subtract the fixed expenses from the contribution margin to obtain the operating income. Calculate the degree of operating leverage by dividing the contribution margin by the operating income.Explanation:To prepare a contribution format income statement forMagic Realm, Incorporated's fantasy board game, we need to calculate the totalrevenue, total variable expenses, and contribution margin. The total revenue is obtained by multiplying the selling price ($69) by the number of games sold (49,500). The total variable expenses are the variable expenses per game ($49) multiplied by the number of games sold. The contribution margin is calculated by subtracting the total variable expenses from the total revenue. The fixed expenses ($891,000) are then subtracted from the contribution margin to obtain the operating income. The degree of operating leverage can be calculated by dividing the contribution margin by the operating income.Learn more aboutContribution format income statementhere:brainly.com/question/30639200#SPJ11...