Exercise 5-15 Operating Leverage [LO5-4, LO5-8] Magic Realm, Inc., has developed

Question

Exercise 5-15 Operating Leverage [LO5-4, LO5-8] Magic Realm, Inc., has developed a new fantasy board game. The company sold 28,800 games last yoa a selling price of $61 per game. Fixed expenses associated with the game total $480,000 per year, and variable expenses are $41 per game. Production of the game is entrusted to a printing contractor. Variabl expenses consist mostly of payments to this contractor Required: 1-a. Prepare a contribution format income statement for the game last year Magic Realm, Inc., Contribution Income Statement Total Per Unit

Explanation / Answer

1-a. Magic Realm Inc.

Contribution Margin Income Statement

1-b.

2.a

b.

Total Per Unit Sales Revenue $ 1,756,800 $ 61 Variable Expenses 1,180,800 41 Contribution Margin 576,000 20 Fixed Costs 480,000 Operating Income ( loss) 96,000

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