Chipotle Mexican Grill, Inc. (CMG) is a quick-service restaurant providing a focused menu of burritos, tacos, and salads. Chipotle's income statements through operating income for two recent years are as follows (in thousands):

 

Required:

a. Prepare a vertical analysis of the two-income statements. Round percentages to one decimal place.

 

b. Based on the calculations above, which of the following statements are correct.

1. Operating income as a percent of revenues declined significantly from Year 1 to Year 2.

2. The primary cause of the increasing expense percentages is the decline in total revenues.

3. When revenues decline, fixed expenses like administrative expenses will increase as a percent of revenues.

Transcribed Image Text:

Chipotle Mexican Grill Inc. Income Statements For the Years Ended Year 2 Year 1 December 31 Revenues $3,904,384 $ 4,501,223 Expenses: S(1,503,835) (1,365,580) Food, beverage, packing Labor (1,105,001) (1,045,726) Rent (occupancy) (293,636) (262,412) General and administrative (641,953) (514,963) (463,647) (410,698) Other Total expenses (3,869,817) (3,737,634) Operating income $ 34,567 $ 763,589 Chipotle Mexican Grill Inc. Income Statements For the Years Ended Year 2 Year 1 December 31 Revenues $3,904,384 $ 4,501,223 Expenses: S(1,503,835) (1,365,580) Food, beverage, packing Labor (1,105,001) (1,045,726) Rent (occupancy) (293,636) (262,412) General and administrative (641,953) (514,963) (463,647) (410,698) Other Total expenses (3,869,817) (3,737,634) Operating income $ 34,567 $ 763,589

Answer rating: 100% (QA)

year 2 year 1 a Amount amount Revenues 3904384 1000 450... View the full answer