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.

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 $1,100 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 $17,500 Food and packaging $5,450 Payroll 4,400 Occupancy (rent, depreciation, etc.) 4,630 General, selling, and administrative expenses 2,500 $16,980 Income from operations $520

Explanation / Answer

a Sales 17500 Variable costs: Food and packaging 5450 Payroll 4400 General, selling, and administrative expenses 1000 Total Variable costs 10850 Contribution margin 6650 b Contribution margin ratio = 6650/17500= 38% c Increase in income from operations = 1100*38%= $418

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