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

See the explanation below.

Step-by-step 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