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Alex777 [14]
3 years ago
7

Required: 1-a. Prepare a contribution format income statement for the game last year. 1-b. Compute the degree of operating lever

age. 2. Management is confident that the company can sell 41,796 games next year (an increase of 9,396 games, or 29%, over last year). Given this assumption: a. What is the expected percentage increase in net operating income for next year
Business
1 answer:
Flura [38]3 years ago
5 0

Question Completion:

Magic Realm, Inc., has developed a new fantasy board game. The company sold 32,400 games last year at a selling price of $67 per game. Fixed expenses associated with the game total $567,000 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. 1-b. Compute the degree of operating leverage. 2. Management is confident that the company can sell 41,796 games next year (an increase of 9,396 games, or 29%, over last year). Given this assumption: a. What is the expected percentage increase in net operating income for next year?

Answer:

Magic Realm, Inc.

1-a. Contribution-Format Income Statement

For the last year ended December 31

Sales revenue          $2,170,000 (32,400 * $67)

Variable costs            1,522,800 (32,400 * $47)

Contribution               $647,200 (32,400 * $20)

Fixed expenses           567,000

Net operating income $80,200

1-b. Degree of Operating Leverage = Contribution/Net operating income

= 8.07

The expected percentage increase in net operating income for next year

= 235.3%

Explanation:

a) Data and Calculations:

Last year's figures:

Sales = 32,400 games

Selling price per game = $67

Variable cost per game = $47

Fixed expenses = $567,000 per year

1-a. Contribution-Format Income Statement

For the last year ended December 31

Sales revenue          $2,170,000 (32,400 * $67)

Variable costs            1,522,800 (32,400 * $47)

Contribution               $647,200 (32,400 * $20)

Fixed expenses           567,000

Net operating income $80,200

1-b. Degree of Operating Leverage = Contribution/Net operating income

= $647,200/$80,200 = 8.07

2. Next year:

Sales = 41,796 games

Sales revenue =         $2,800,332 (41,796 * $67)

Variable cost =               1,964,412  (41,796 * $47)

Contribution =              $835,920

Fixed costs =                  567,000

Net operating income $268,920

The expected percentage increase in net operating income for next year

Increase in net operating income = $188,720 ($268,920 - $80,200)

= $188,720/$80,200 * 100 = 235.3%

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Last year you paid $24 for a round of golf and $12 to rent a golf cart. This year it cost you $33 to golf and $15 to rent a cart
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Answer:

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Explanation:

In the above , the base price which is meant to the the last year price would be;

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8 0
3 years ago
Plainville Corporation has the following data, in thousands. Assuming a 365-day year, what is the firm's cash conversion cycle?
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Answer:

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Inventory cycle  = <u>$75,000</u>     x 365 days

                              $360,000  

                           = 76.04 days

Receivable days =  <u>Accounts receivable</u> x  365 days

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                            = <u>$160,000</u>   x 365 days

                               $600,000  

                            =  97.33 days

Payable days      = <u>Accounts payable</u>  x 365 days

                              Cost of sales      

                            = <u>$25,000 </u>    x 365 days

                               $360,000  

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Explanation:

Cash conversion cycle is calculated as raw inventory cycle plus receivable days minus payable days. Inventory cycle is the ratio of inventory to cost of goods sold multiplied by number of days in a year. Receivable days refer to the ratio of accounts receivable to sales multiplied by number of days in a year. Payable day is the ratio of accounts payable to cost of goods sold multiplied by number of days in a year.

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you too!

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