# Contribution margin and contribution margin ratio

Oct 12th, 2015
SKTFaker
Category:
Accounting
Price: \$15 USD

Question description

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

 Sales \$  18,602.5 Food and packaging \$  6,318.2 Payroll 4,710.3 Occupancy (rent, depreciation, etc.) 4,195.2 General, selling, and administrative 2,445.2 17,668.9 Income from operations \$  933.6

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

1.  What is McDonald’s contribution margin?  (Round your answer to the nearest tenth of one decimal place.)

2.  What is McDonald’s contribution margin ratio?  (Round your answer to one decimal place.)

3.  How much would income from operations increase if same-store sales increased by \$900 million for the coming year, with no change in the contribution margin ratio or fixed costs?  (Round your answer to the nearest tenth of a million [one decimal place]).

(Top Tutor) Daniel C.
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School: UT Austin

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Sigchi4life
Oct 18th, 2015
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