Question

Magic Realm, Inc., has developed a new fantasy board game. The company sold 47,500 games last year at a selling price of $67 per game. Fixed expenses associated with the game total $855,000 per year, and variable expenses are $47 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.

Answer 1

Answer:

See the explanation below.

Explanation:

Magic Realm, Inc. Contribution Income Statement for last year

Details                                                     Total ($)       Per Unit ($)

Sales revenue (47,500 × $67)             3,182,500                67

Variable cost (47,500 × $47)              (2,232,500)             (47)

Contribution                                            950,000               20

Fixed expenses                                     (855,000)

Net operating expenses                          95,000