Reference no: EM132783220

Question - Contribution Margin and Contribution Margin Ratio

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

Sales $25,800

Food and packaging $10,474

Payroll 6,800

Occupancy (rent, depreciation, etc.) 4,626

General, selling, and admin expenses 3,900

Other expense 520

Total expenses (26,320)

Operating income (loss) $(520)

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? Enter your answer in million, rounded to one decimal place.

b. What is McDonald's contribution margin ratio? Round your percentage answer to one decimal place.

c. How much would operating income increase if same-store sales increased by $1,500 million for the coming year, with no change in the contribution margin ratio or fixed costs?

d. What would have been the operating income or loss for the recent year if sales had been $1,500 million more?

e. To achieve break even for the recent year, by how much would sales need to increase? Enter your answer in million rounded to the nearest whole number.