For a recent year, McDonalds company-owned restaurants had the following sales and expenses (in millions): Sales $16,083

Question:

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

Sales $16,083

Food and packaging $ 5,350

Payroll 4,185

Occupancy (rent, depreciation, etc.) 4,006

General, selling, and administrative expenses 2,340

$15,881

Income from operations $ 202

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.

b. What is McDonald’s contribution margin ratio? Round to one decimal place.

c. How much would income from operations increase if same-store sales increased by $500 million for the coming year, with no change in the contribution margin ratio or fixed costs?

Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...