For a recent year, Wicker Co. owned a restaurants that had the following sales &
ID: 2369461 • Letter: F
Question
For a recent year, Wicker Co. owned a restaurants that had the following sales & expenses.Sales $17,700
Food & Packaging $5,965
Payroll 4,500
Occupancy (rent,depreciation, etc) 4,105
General, selling, administrative expenses 2,600
$17,170
Income from operations $530
Assume that the variable costs consist of food and packaging, payroll, and 40% of the general, selling, and adminstrative expenses.
(a) what is Wicker Co. contribution margin? (round to nearest million)
(b) What is Wicker Co. contribution margin ratio?(round to one decimal place)
(c) How much would income from operations increase if same-store sales increased by $1,100 million for the coming year, with no change in the contribution margin ratio or fixed costs?
Explanation / Answer
Sales $17,700 Less Var costs : Food & Packaging $5,965 Payroll 4,500 General S&A =40%*2,600=$1040 --------------------------------------- Total Cont = $6,195 Less FC:= General S&A =60%*2,600=$1560 Occupancy (rent,depreciation, etc) 4,105 ---------------------------------------------------- Net Income = $530 ----------------------------- (a) what is Wicker Co. contribution margin? (round to nearest million) Total Cont = $6,195 (b) What is Wicker Co. contribution margin ratio?(round to one decimal place) CM Ratio = Total Cont/Total Sales = $6,195/17700 = 35.0% (c) How much would income from operations increase if same-store sales increased by $1,100 million for the coming year, with no change in the contribution margin ratio or fixed costs? CM Ratio = Total COnt/Total Sales SO Total Cont = CM Ratio*Tota Sales = 35%*(17700+1100) = $6,580 SO Net Income = Total Cont - FCs = 6580-(1560+4105) = $915 SO Net Income increased by 915-530 = $385
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