Contribution Margin and Contribution Margin Ratio For a recent year, McDonald\'s

Question

Contribution Margin and Contribution Margin Ratio For a recent year, McDonald's company-owned restaurants had the following sales and expenses (in millions) Sales Food and packaging Payroll Occupancy (rent, depreciation, etc.) General, selling, and administrative expenses $18,169.3 6,129.7 4,756.0 4,402.6 2,487.9 17,776.2 393.1 Income from operations 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 tenth of a million (one decimal place). million b. What is McDonald's contribution margin ratio? Round to one decimal place. c. How much would income from operations increase if same-store sales increased by $500 million for the coming year, with no change in the contribution margin ratio or fixed costs? Round your answer to the nearest tenth of a million (one decimal place). million Next

Explanation / Answer

Dear Student Thank you for using Chegg Please find below the answer and please give thumbs up   Statementshowing Computations Paticulars Amount Sales               18,169.30 Less Variable Expenses food and packaging                 6,129.70 Payroll                 4,756.00 General selling and admin exp=2487.9*.40                     995.16 Total Variable expenses               11,880.86 a) Contribution Margin                 6,288.44 Fixed cost Occupancy                 4,402.60 General selling and admin exp=2487.9*.60                 1,492.74 Total Fixed costs                 5,895.34 Net operating income                     393.10 b) contributiojn margin ratio = 6288.44/18169.30 34.61% c) if sales increase by 500m then income would increase by 500m*34.61%    173,051,245.78

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