For a recent year, Wicker Company-owned restaurants had the following sales and

Question

For a recent year, Wicker 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. What is Wicker Company's contribution margin? Round to the nearest million. (Give answer in millions of dollars.) What is Wicker Company's contribution margin ratio? Round to one decimal place. How much would income from operations increase if same-store sales increased by $1,600 million for the coming year, with no change in the contribution margin ratio or fixed sts? Round your answer to the closest million.

Explanation / Answer

Solution:

a. Contribution Margin = Sales - Variabl expenses

ans- $7,476 millions.

b. Contribution margin ratio = $7,476 / $26,700 = 28%

c. Sales = $26,700 + $1,600 = $28,300

Contribution = 28% of sales

Hence variable cost = 72% of sales

Variable costs = $20,376

Fixed costs = $4,336 + 60% of $3,900 = $4,336 + $2,340 = $6,676

Income from operations = $28,300 - $20,376 - $6,676 = $1,248 millions.

Sales $26,700 Less: Food $10,964 Payroll 6,700 General selling expenses (40%) 1,560 19,224 Contribution Margin 7,476

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