For a recent year, McDonald\'s company-owned restaurants had the following sales

Question

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

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 tenth of a million (one decimal place).
$ 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 $900 million for the coming year, with no change in the contribution margin ratio orfixed costs? Round your answer to the nearest tenth of a million (one decimal place).
$ million

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 expenses 2,445.2 17,668.9 Income from operations $  933.6

Explanation / Answer

McDonald's Restaurants CVP Analysis Details Amt $ Million Sales Revenue                  18,602.50 Less Variable costs Food & Packaging                    6,318.20 Payroll                    4,710.30 Variable Gen ,Selling , Admin (40%)                        978.08 Total Variable costs                  12,006.58 a Contribution Margin   $                  6,595.9 Miilion b CM Ratio= CM/Sales= 35.5% Less Fixed Costs Occupancy                    4,195.20 Fixed Gen ,Selling , Admin (40%)                    1,467.12 Total Fixed costs                    5,662.32 Net Operating Income                        933.60 c If Sales increase by $ 900 million, Increase in Contribution margin@35.5% of sales =                          319.1 As fixed costs are unchanged, the net   operating income will increase by   $                      319.1

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