Acc105

Contribution Margin Ratio

(7) a. Matzinger Company budgets sales of $10,400,000, fixed costs of $1,100,000, and variable costs of $6,656,000. What is the contribution margin ratio for Matzinger Company? %

b. If the contribution margin ratio for Raynor Company is 41%, sales are $6,200,000, and fixed costs are $1,350,000, what is the operating income? $

(8) Contribution Margin and Contribution Margin Ratio

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

Sales		$16,488
Food and packaging	$5,552
Payroll	4,400
Occupancy (rent, depreciation, etc.)	4,025
General, selling, and admin. expenses	2,434
Other expense	209
Total expenses		(16,620)
Operating income (loss)		$(132)

Assume that the variable costs consist of food and packaging, payroll, and 45% of the general, selling, and administrative expenses.

a. What is McDonald's contribution margin? Enter your answer in million, rounded to one decimal place. $ million

b. What is McDonald's contribution margin ratio? Round your percentage answer to one decimal place. %

c. Use the rounded contribution margin ratio value to answer the following question: how much would operating income increase if same-store sales increased by $500 million for the coming year, with no change in the contribution margin ratio or fixed costs? $ million

d. What would have been the operating income or loss for the recent year if sales had been $500 million more? $ million

e. Use the rounded contribution margin ratio value to answer the following question: To achieve break even for the recent year, by how much would sales need to increase? $ million