or a recent vear, Wicker Company-owned restaurants had the following sales and e

Question

or a recent vear, Wicker 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 $23,900 $6,940 6,000 6,740 3,500 $23,180 $720 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 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 $1,400 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 ty Work Previous Next

Explanation / Answer

variable cost = 6940+6000+40% of 3500                              = 14340 Fixed cost = 6740+60% of 3500                       = 8840 1 contribution margin = sales - variable cost                                          = 23900-14340                                          = 9560 2 contribution margin ratio = contribution / sales                                                       = 9560/23900                                                        = 40% 3 revised sales = 23900+1400                            = 25300 revised contribution = 25300*40%                                             = 10120 fixed cost = 8840 revised income from operations= 25300-10120-8840                                                                    = 6340 increment in income = 6340-720                                             = 5620

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