Reference no: EM132685610
Problem - Contribution margin and contribution margin ratio
For a recent year, McDonald's company-owned restaurants had the following sales and expenses (in millions):
Sales $16,561
Food and packaging $ 5,586
Payroll 4,300
Occupancy (rent, depreciation, etc.) 3,767
General, selling, and administrative expenses 2,355
$16,008
Income from operations $ 553
Assume that the variable costs consist of food and packaging, payroll, and 40% of the general, selling, and administrative expenses.
Required -
a. What is McDonald's contribution margin? Round to the nearest million.
b. What is McDonald's contribution margin ratio? Round to one decimal place.
c. How much would income from operations increase if same-store sales increased by $400 million for the coming year, with no change in the contribution margin ratio or fixed costs?
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