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Chrome File Edit View History Bookmarks People Window Help a * = ->) 99% EM Tue 5:20 PM = CengageNOWv2 | Online teaching and learning resource from Cengage Learning O Not Secure | v2.cengagenow.com/ilrn/takeAssignment/takeAssignmentMain.do?invoker=assignments&takeAssignmentSessionLocator;=assignment-take&inprogress;=false Chapter 19 Assignment 1 eBook ( Show Me How A Calculator Contribution Margin and Contribution Margin Ratio For a recent year, McDonald's Company-owned restaurants had the following sales and expenses (in millions): Sales $32,200 Food and packaging $13,848 Payroll 8,100 Occupancy (rent, depreciation, etc.) 4,582 General, selling, and administrative expenses 4,700 $31,230 Income from operations $970 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 million. (Give answer in millions of dollars.) million b. What is McDonald's contribution margin ratio? C. How much would income from operations increase if same-store sales increased by $1,900 million for the coming year, with no change in the contribution margin ratio or fixed costs? Round your answer to the closest million. million Check My Work 99 m 900 TuSOME LOA BLUE

Explanation / Answer

a. Contribution Margin = Sales – Variable Expenses

Contribution Margin = $32,200 - $13,848 - $8,100 - ($4,700 × 0.40)

Contribution Margin = $8,372 million

b. Contribution Margin Ratio = Contribution Margin / Sales

Contribution Margin Ratio = $8,372 / $32,200

Contribution Margin Ratio = 0.26 or 26%

c. Increase in income from operations = Same-store sales increase × Contribution margin ratio

Increase in income from operations = $1,900 million × 26%

Increase in income from operations = $494 million

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