Contribution Margin and Contribution Margin Ratio
For a recent year, Wicker Company-owned restaurants had the following sales and expenses (in millions):
Sales | $16,300 |
Food and packaging | $5,046 |
Payroll | 4,100 |
Occupancy (rent, depreciation, etc.) | 4,264 |
General, selling, and administrative expenses | 2,400 |
$15,810 | |
Income from operations | $490 |
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 $1,000 million for the
coming year, with no change in the contribution margin ratio or
fixed costs? Round your answer to the closest million.
____________ $ million
Variable cost = 5046+4100+(2400*40%) = 10106
a) Contribution margin = 16300-10106 = 6194 million
b) Contribution margin ratio = 6194*100/16300 = 38%
c) Income from operation increase by = 1000*38% = 380 million
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