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 $1,200 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 $20,100 Food and packaging $6,202 Payroll 5,100 Occupancy (rent, depreciation, etc.) 5,298 General, selling, and administrative expenses 2,900 $19,500 Income from operations $600

Explanation / Answer

Dear Student Thank you for using Chegg Please find below the answer Statementshowing Computations Paticulars Amount Sales              20,100.00 Variable Costs: Food and packaging               6,202.00 Payroll               5,100.00 General, selling, and administrative expenses = 2900 * 0.40               1,160.00 Total Variable costs            12,462.00 a) contribution margin = 20100 - 12462               7,638.00 b) Contribution margin ratio = 7638/20100 38.00% c) If sales increase by 1200 Income will increase by 1200 * 38%                  456.00

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