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

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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.

a. What is Wicker Company's contribution margin? Round to the nearest million. (Give answer in millions of dollars.)
$ million

b. What is Wicker Company's contribution margin ratio? Round to one decimal place.
%

c. How much would income from operations increase if same-store sales increased by $2,000 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 $33,500 Food and packaging $13,995 Payroll 8,500 Occupancy (rent, depreciation, etc.) 5,105 General, selling, and administrative expenses 4,900 $32,500 Income from operations $1,000

Explanation / Answer

a Sales 33500 Variable costs: Food and packaging 13995 Payroll 8500 General, selling, and administrative expenses 1960 24455 Contribution margin 9045 b Contribution margin ratio=9045/33500= 27% c Increase in income from operations = 2000*27%= $540

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