Contribution Margin and Contribution Margin Ratio For a recent year, Wicker Comp

Question

Contribution Margin and Contribution Margin Ratio

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.

c. How much would income from operations increase if same-store sales increased by $1,700 million for the coming year, with no change in the contribution margin ratio or fixed costs? Round your answer to the closest million.

$ million

Sales $27,500 Food and packaging $7,725 Payroll 6,900 Occupancy (rent, depreciation, etc.) 8,055 General, selling, and administrative expenses 4,000 $26,680 Income from operations $820

Explanation / Answer

c) Calculate effect on income from operations :

Income from operation increase by $697

Incremental revenue 1700 Incremental cost (1700*59%) -1003 Incremental profit and loss 697

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