ncesExercise 6-15 (Algo) Operating Leverage [LO6-1, LO6-8]Magic Realm, Incorporated, has developed a new fantasy board game. The company sold 32,800 games last year at a selling price of$62 per game. Fixed expenses associated with the game total $574,000 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 41,656 games next year (an increase of 8,856 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 ofoperating leverage to compute your answer.)Complete this question by entering your answers in the tabs below.Req 1AReq 1BReq 2Prepare a contribution format income statement for the game last year.Magic Realm, Incorporated,Contribution Income StatementTotalPer Unit

Income statement is a financial statement that shows profitability, total revenue and total…

Answered: Magic Realm, Incorporated, has…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

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Magic Realm, Incorporated, has developed a new fantasy board game. The company sold 60,000 games last year at a selling price of $60 per game. Fixed expenses associated with the game total S1,100,000 per year, and variable expenses are $40 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.
Magic Realm, Incorporated, has developed a new fantasy board game. The company sold 55,800 games last year at a selling price of $62 per game. Fixed expenses associated with the game total $1,023,000 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 70,308 games next year (an increase of 14,508 games, or 26%, 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.)
Magic Realm, Inc., has developed a new fantasy board game. The company sold 42,500 games last year at a selling price of $65 per game. Fixed expenses associated with the game total $765,000 per year, and variable expenses are $45 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 51,425 games next year (an increase of 8,925 games, or 21%, 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.) Req 1A Req 1B Req 2 Prepare a contribution format income statement for the game…
Magic Realm, Incorporated, developed a new fantasy board game and sold 47,500 units last year at a selling price of $66 per game. Fixed expenses associated with the game are $855,000 per year, and variable expenses are $46 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. 2. Management is confident that the company can sell 61,750 games next year (an increase of 14,250 games, or 30%, 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…
Magic Realm, Incorporated, has developed a new fantasy board game. The company sold 38,000 games last year at a selling price of $61 per game. Fixed expenses associated with the game total $665,000 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. 1h Compute the
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4 Lowwater Sailmakers manufactures sails for sailboats. The company has the capacity to produce 25,000 sails per year, but is currently producing and selling 20,000 sails per year. The following information relates to current production. If a special sales order is accepted for 4,500 sails at a price of $120 per unit, and fixed costs remain unchanged, how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order.) Sale price per unit $150 Variable costs per unit: Manufacturing Marketing and administratrve $60 $20 Total fixed costs: Manufacturing Marketing and administrative $600,000 S200,000 Increase by $160,000 ) Increase by $150,000 ) Increase by $140,000 Increase by S170,000 ) Increase by S180,000 ()
Griffin and Lasky, Inc. (G&L), supplies industrial automation equipment and machine tools to the automotive industry. G&L recognizes revenue on its long-term contracts over time. Customer orders have long lead times because they involve multiyear capital investment programs. Sometimes orders are canceled. Selected items from the company's financial statements follow. ($ in millions) 20X1 20X2 20X3 Sales $571.5 $619.5 $730.6 Accounts receivable-billed 141.6 94.5 147.9 Accounts receivable-unbilled 104.5 249.4 202.7 Total accounts receivable 246.1 343.9 350.6 57.4 102.3 Inventory Earnings before interest and taxes (EBIT) Depreciation and amortization Plant write-down 74.8 74.8 75.8 38.1 14.8 15.4 19.3 30.3 Required: 1. Compute earnings before interest, taxes, depreciation, and amortization (EBITDA) and adjusted EBITDA-after excluding the plant write-down-for each year in the schedule. 2. Are profits at G&L keeping pace with sales? 3. Compute the days receivables outstanding using year-end…
Please help with 2A and 2B. I can't seem to figure those out. The other parts of the question I have completed. Magic Realm, Incorporated, has developed a new fantasy board game. The company sold 47,000 games last year at a selling price of $69 per game. Fixed expenses associated with the game total $846,000 per year, and variable expenses are $49 per game. Production of the game is entrusted to a printing contractor. Variable expenses consist mostly of payments to this contractor. 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 58,280 games next year (an increase of 11,280 games, or 24%, 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…
This case study is a justification of a computer system for, the ABC Company. The following are known data: • The combined initial hardware and software cost is $80,000. • Contingency costs have been set at $15,000. These are not necessarily incurred. • A service contract on the hardware costs $500 per month. • The effective income tax rate (t) is 38%. • Company management has established a 15% (= im) per year hurdle rate (MARR). In addition, the following assumptions and projections have been made: • In order to support the system on an ongoing basis, a programmer/ analyst will be required.The starting salary (first year) is $28,000, and fringebenefits amount to 30% of the base salary. Salaries are expected to increase by 6% each year thereafter. • The system is expected to yield a staff savings of three persons (to be reduced through normal attrition) at an average salary of $16,200 per year per person (base salary plus fringes) in year-zero (base year) dollars. It is anticipated…
15. Project NPV (S6.3) A widget manufacturer currently produces 200,000 units a year. It buys widget lids from an Page 176 outside supplier at a price of $2 a lid. The plant manager believes that it would be cheaper to make these lids rather than buy them. Direct production costs are estimated to be only $1.50 a lid. The necessary machinery would cost $150,000 and would last 10 years. This investment could be written off immediately for tax purposes. The plant manager estimates that the operation would require additional working capital of $30,000 but argues that this sum can be ignored since it is recoverable at the end of the 10 years. If the company pays tax at a rate of 21% and the opportunity cost of capital is 15%, would you support the plant manager's proposal? State clearly any additional assumptions that you need to make.
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 expenses associated with the game total $182,000 per year, and variable expenses are $6 per game. Production of the game is entrusted to a printing contractor. Variable expenses consist mostly of payments to this contractor.Required:1. Prepare a contribution format income statement for the game last year and compute the degree of operating leverage.2. Management is confident that the company can sell 18,000 games next year (an increase of 3,000 games, or 20%, 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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