For a recent year, McDonalds Corporation had the following sales and expenses (in millions): Sales . .

Question:

For a recent year, McDonald’s Corporation had the following sales and expenses (in millions):

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14,870

Food and packaging . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,802

Payroll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,901

Occupancy (rent, depreciation, etc.) . . . . . . . . . . . . 3,551

General, selling, and administrative expenses . . . . 1,919

$12,173

Income from operations . . . . . . . . . . . . . . . . . . . . . . $ 2,697

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 two decimal places.

c. How much would income from operations increase if same-store sales increased by $300 million for the coming year, with no change in the contribution margin ratio or fixed costs?

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