Question: Contribution margin and contribution margin ratio For a recent year, McDonalds (MCD) company-owned restaurants had the following sales and expenses (in millions): Line Item Description
Contribution margin and contribution margin ratio
For a recent year, McDonalds (MCD) company-owned restaurants had the following sales and expenses (in millions):
| Line Item Description | Amount |
|---|---|
| Sales | $20,000 |
| Food and paper | $(2,800) |
| Payroll and employee benefits | (2,300) |
| Occupancy and other expenses | (4,300) |
| General, selling, and administrative expenses | (4,600) |
| Total | $(14,000) |
| Operating income | $6,000 |
Assume that the variable costs consist of food and paper, payroll, 25% of occupancy and other expenses, and 40% of the general, selling, and administrative expenses.
a. What is McDonald's contribution margin? $______ million
b. What is McDonald's contribution margin ratio? Round to one decimal place. _______ %
c. How much would operating income 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). $ ______ million
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
