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

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

Sales ...................$16,233

Food and packaging .............$ 5,300

Payroll ................. 4,121

Occupancy (rent, depreciation, etc.) ....... 3,638

General, selling, and administrative expenses .. 2,334

$15,393

Income from operations ..........$ 840

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

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 $ 811 million for the coming year, with no change in the contribution margin ratio or fixed costs? Round your answer to the closest million.


Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...
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Financial and Managerial Accounting

ISBN: 978-1285078571

12th edition

Authors: Carl S. Warren, James M. Reeve, Jonathan Duchac

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