For a recent year, McDonalds had the following sales andexpenses (in millions):

Question

For a recent year, McDonalds had the following sales andexpenses (in millions):

Sales                                                                        15,352

Food andpackaging                                                  5,204

Payroll                                                                       4,040

Occupancy (rent, depreciation,etc.)                           1,022

General, selling, and administrativeexpenses              2,220

                                                                                 12,468

Income fromoperations                                              2,866

Assume that the variable costs consist of food and packaging,payroll, and 40% of the general, selling, and administrativeexpenses.

A. What is McDonald’s contribution margin? Round to thenearest millionth

B. What is McDonald’s contribution margin? Round to thenearest decimal places.

C. How much would income from operating increase if same-storessales increased by $450 million for the coming year, with no chargein the contribution margin ratio or fixed costs?

Explanation / Answer

ofSales

Sales 15,352.00 Less : Variable Costs 5,204.00 Payroll 4,040.00 40% of General & Administrative 888.00 10,132.00 overhead A.Contribution Marginrounded to nearest Millionth 5,220.00 B.Contribution Marginrounded to nearest Decimal Place 0.34

ofSales

C. Change in Operating Income Change in Sales 15,802.00 Contribution Margin 5,372.68 Less: Fixed Costs 1,332.00 NetIncome 4,040.68

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