Question
Contribution margin and contribution margin ratio For a recent year, McDonalds (MCD) company-owned restaurants had the following sales and expenses (in millions): Line Item Description
Contribution margin and contribution margin ratio
For a recent year, McDonalds (MCD) company-owned restaurants had the following sales and expenses (in millions):
Line Item Description | Amount |
---|---|
Sales | $19,207.8 |
Food and paper | $(2,564.2) |
Payroll and employee benefits | (2,416.4) |
Occupancy and other expenses | (4,357.6) |
General, selling, and administrative expenses | (2,545.6) |
Total | $(11,883.8) |
Operating income | $7,324.0 |
Assume that the variable costs consist of food and paper, payroll, 25% of occupancy and other expenses, and 40% of the general, selling, and administrative expenses.
a. What is McDonald's contribution margin? Round to the nearest tenth of a million (one decimal place).
b. What is McDonald's contribution margin ratio? Round to one decimal place.
c. How much would operating income increase if same-store sales increased by $800 million for the coming year, with no change in the contribution margin ratio or fixed costs? Round your answer to the nearest tenth of a million (one decimal place).
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