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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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