1) For a recent year, McDonald\'s Company-owned restaurants had the following sa
ID: 2567532 • Letter: 1
Question
1) 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
2) For the current year ended October 31, Friedman Company expects fixed costs of $468,000, a unit variable cost of $52, and a unit selling price of $78.
a. Compute the anticipated break-even sales (units).
units
b. Compute the sales (units) required to realize income from operations of $106,600.
units
3) Anheuser-Busch InBev Companies, Inc., reported the following operating information for a recent year:
In addition, assume that Anheuser-Busch InBev sold 60,000 barrels of beer during the year. Assume that variable costs were 75% of the cost of goods sold and 50% of selling, general, and administration expenses. Assume that the remaining costs are fixed. For the following year, assume that Anheuser-Busch InBev expects pricing, variable costs per barrel, and fixed costs to remain constant, except that new distribution and general office facilities are expected to increase fixed costs by $21,600.
a. Compute the break-even number of barrels for the current year. Round to the nearest whole barrel.
barrels
b. Compute the anticipated break-even number of barrels for the following year. Round to the nearest whole barrel.
barrels
Explanation / Answer
Answer 1-a McDonald's contribution margin (in $ millions) Sales $36,100 Less : Variable costs - Food and Packaging $9,357 - Payroll $9,100 - 40% of General, selling, and administrative expenses $2,120 Contribution Margin $15,523 Answer 1-b McDonald's contribution margin ratio = Contribution Margin / Sales = $15523 / $36100 = 43% Answer 1-c Increase in income from operations = Increase in sales * Contribution margin ratio = $2200 millions * 43% = $946 millions Answer 2-a Break even sales in units = Fixed Cost / (Selling price per unit - Variable cost per unit) Break even sales in units = $468000 / ($78 - $52) = 18000 units Answer 2-b Sales units required to realize the income from operations of $106,600 = (Fixed Cost+anticipated profit) / (Selling price per unit - Variable cost per unit) Sales units required to realize the income from operations of $106,600 = ($468000+$106600) / ($78 - $52) = 22100 units Answer 3-a Selling price per barrel = $6720000 / 60000 barrels = $112 per barrel Variable cost per barrel = [(75% * $1680000)+(50% * $600000)] / 60000 barrels = $26 per barrel Fixed cost = (25% * $1680000)+(50%*$600000) = $7,20,000 The break-even number of barrels for the current year = Fixed Cost / (Selling price per barrel - Variable cost per barrel) The break-even number of barrels for the current year = $720000 / ($112-$26) = 8372 barrels Answer 3-b The anticipated break-even number of barrels for the following year = Revised Fixed Cost / (Selling price per barrel - Variable cost per barrel) The anticipated break-even number of barrels for the following year = ($720000+$21600) / ($112-$26) = 8623 barrels
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.