Reference no: EM132574773

Contribution Margin and Contribution Margin Ratio

For a recent year, McDonald's (MCD) company-owned restaurants had the following sales and expenses (in millions):

Sales $41,400

Food and packaging $(14,524)

Payroll (10,400)

Occupancy (rent, depreciation, etc.) (9,236)

General, selling, and administrative expenses (6,000)

                                                  $(40,160)

Operating income $1,240

Assume that the variable costs consist of food and packaging, payroll, and 40% of the general, selling, and administrative expenses.

Question a. What is McDonald's contribution margin? Round to the nearest million. (Give answer in millions of dollars.)

Question b. What is McDonald's contribution margin ratio?

Question c. How much would operating income increase if same-store sales increased by $2,500 million for the coming year, with no change in the contribution margin ratio or fixed costs? Round your answer to the closest million.