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Compute the expected percentage increase in profit

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Magic Realm Ltd has developed a new fantasy board game. The company sold 18,500 games last year at a selling price of £18,500 per game. Fixed costs associated with the game total £226,625 per year, and variable costs are £6 per game. Production of the game is entrusted to a printing contractor. Variable costs consist mostly of payments to this contractor.

Management is confident that the company can sell 22,200 games next year (an increase of 3,700 games, or 20 per cent, over last year).

Problem (a) Compute the expected percentage increase in profit for next year. (Do not create a statement of profit or loss; use the degree of operating leverage to compute your answer.) (Do not round intermediate calculations.)

Reference no: EM132655591

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