Analyze Chipotle Mexican Grill

Chipotle Mexican Grill, Inc. (CMG) is a quick-service restaurant providing a focused menu of burritos, tacos, and salads. Chipotles income statements through operating income for two recent years are as follows (in thousands):

Analyze Chipotle Mexican Grill Chipotle Mexican Grill, Inc. (CMG) is a quick-service restaurant providing a focused menu of burritos, tacos, and salads. Chipotle's income statements through operating income for two recent years are as follows (in thousands): Chipotle Mexican Grill, Inc. Income Statements For the Years Ended December 31 (in thousands) Year 2 Year 1 Revenues $3,904,384 $4,501,223 Expenses: Food, beverage, packing $(1,365,580) $(1,503,835) Labor (1,105,001) (1,045,726) Rent (occupancy) (293,636) (262,412) General and administrative (641,953) (514,963) Other (463,647) (410,698) Total expenses $(3,869,817) $(3,737,634) Operating income $34,567 $763,589 Required: a. Prepare a vertical analysis of the two income statements. Round percentages to one decimal place. Chipotle Mexican Grill, Inc. Income Statements For the Years Ended December 31 a. Prepare a vertical analysis of the two income statements. Round percentages to one decimal place. Chipotle Mexican Grill, Inc. Income Statements For the Years Ended December 31 (in thousands) Year 2 Year 1 Amount Percent Amount Percent Revenues $3,904,384 16.5 X % $4,501,223 Expenses: Food, beverage, packing Labor Rent (ocupancy) $(1,365,580) (1,105,001) (293,636) (641,953) (463,647) % $(1,503,835) % (1,045,726) % (262,412) (514.963) (410,698) % $(3,737,634) General and administrative Other Total expenses $(3,869,817) Operating income $34,567 % $763,589 Accounting numeric field b. Based on the calculations above, which of the following statements are correct. 1. Operating income as a percent of revenues declined significantly from Year 1 to Year 2. 2. The primary cause of the increasing expense percentages is the decline in total revenues. 3. When revenues decline, fixed expenses like administrative expenses will increase as a percent of revenues