For a recent year, McDonald’s (MCD) company-owned restaurants had the following sales and expenses (in millions):...

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For a recent year, McDonald’s (MCD) company-owned restaurants had the following sales and expenses (in millions):...

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

Sales	$19,200
Food and packaging	$(7,712)
Payroll	(4,800)
Occupancy (rent, depreciation, etc.)	(3,308)
General, selling, and administrative expenses	(2,800)
	$(18,620)
Operating income	$580

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 operating income increase if same-store sales increased by $1,200 million for the coming year, with no change in the contribution margin ratio or fixed costs? Round your answer to the closest million.
$ million

business accounting

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Answer 1

Answer #1

Total variable cost = $7,712 + $4,800 + ($2,800 X 40%) = $13,632

Total fixed cost = $3,308 + ($2,800 X 60%) = $4,988

a.

Contribution margin = $19,200 - $13,632 = $5,568

b.

Contribution margin ratio = $5,568 / $19,200 = 29%

c.

Increase in operating income = $1,200 X 29% = $348

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Answer 2

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