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): Sales $30,700 Food and packaging $12,297 Payroll 7,700 Occupancy (rent, depreciation, etc.) 5,283 General, selling, and administrative expenses 4,500 $29,780 Income from operations $920 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 $1,800 million for the coming year, with no change in the contribution margin ratio or fixed costs? Round your answer to the closest million. $ million

Explanation / Answer

Contribution margin = sales-variable cost

Sales- 30,700

(-) food & packing. 12,297

Payroll. 7700

Selling 40%. 1800

Variable cost=21,797

Contribution margin =30,700-21,797=8903

2). Contribution margin ratio= (Sales-variable expenses)/sales

8903/30,700=29.00%

3). 1800000000*29.00=522 million

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