For a recent year, McDonald\'s Company-owned restaurants had the following sales

Question

For a recent year, McDonald's Company-owned restaurants had the following sales and expenses (in millions):

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 million. (Give answer in millions of dollars.)
$ million

b. What is McDonald's contribution margin ratio?
%

c. How much would income from operations increase if same-store sales increased by $2,200 million for the coming year, with no change in the contribution margin ratio or fixed costs? Round your answer to the closest million.
$ million

Sales $37,200 Food and packaging $14,108 Payroll 9,400 Occupancy (rent, depreciation, etc.) 7,172 General, selling, and administrative expenses 5,400 $36,080 Income from operations $1,120

Explanation / Answer

Dear Student Thank you for using Chegg Please find below the answer Statementshowing Computations Paticulars Amount in m Sales                 37,200.00 Less Variable Expenses Food and packaging                 14,108.00 Payroll                   9,400.00 General, selling, and administrative expenses = 5400 * .40                   2,160.00 Total Variable Cost                 25,668.00 a) Contribution Margin                 11,532.00 Fixed cost General, selling, and administrative expenses = 5400 * .60                   3,240.00 Occupancy (rent, depreciation, etc.)                   7,172.00 Total Fixed costs                 10,412.00 Income from operations                   1,120.00 b) Contribution margin ratio = 11532/37200 31.00% if same-store sales increased by $2,200 million for the coming year, income will increaseby = 2200*31% = 682 Million

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