Contribution Margin and Contribution Margin Ratio For a recent year, McDonald's Company owned restaurants had the following sales and expenses (in millions): $14,000 Sales Food and packaging Payroll Occupancy (rent, depreciation, etc.) General, seling, and administrative expenses $3,960 3,500 4,120 2,000 $13,580 Income from operations $420 Assume that the variable costs consist of food and packaging, payroll, and 40% of the general, selling, and administrative expenses 2. What is McDonald's contribution margin? Round to the nearest million (Give answer in millions of dollars.) million b. What is McDonald's contribution margin ratio? c. How much would income from operations increase if same store sales increased by 1800 million for the coming year, with no change in the contribution margin ratio or found costs found your answer to the closest milion million Break-Even Sales Anheuser-Busch InBev Companies, Inc., reported the following operating information for a recent year: Sales $4,480,000 Cost of goods sold $1,120,000 Selling, general and administration 448,000 $1,568,000 Income from operations $ 2,912,000 "Before special items In addition, assume that Anheuser Busch InBev sold 28,000 barrels of beer during the year. Assume that variable costs were 75% of the cost of goods sold and 50% of selling, general, and administration expenses. Assume that the remaining costs are fixed. For the following year, assume that Anheuser Busch InBev expects pricing, variable costs per barrel, and feed costs to remain constant, except that new distribution and general office facilities are expected to increase fixed costs by $15,100. a. Compute the break-even number of barrels for the current year. Round to the nearest whole barrel barrels b. Compute the anticipated break-even number of barrels for the following year. Round to the nearest whole barret barrels Break-Even Sales and Sales to Realize Income from Operations For the current year ended October 31, Friedman Company expects foxed costs of $404,800, a unit variable cost of $48, and a unit selling price of $71. a. Compute the anticipated break-even sales (units). units b. Compute the sales (units) required to realize income from operations of $92,000. units Feedback Check My Work a. Fixed costs divided by the unit contribution margin equals break-even point in units b. Sales (units) = (Fixed Costs + Targot Profit) - Unit Contribution Margin Leaming Objective 3. Break Even Sales Currently, the unit selling price of a product is $290, the unit variable cost is $240, and the total fixed costs are $540,000. A proposal is being evaluated to increase the unit selling price to $330. a. Compute the current break-even sales (units). units b. Compute the anticipated break-even sales (units), assuming that the unit selling price is increased and all costs remain constant. units Sales Mix and Break-Even Sales Dragon Sports Inc, manufactures and sells two products, baseball bats and baseball gloves. The foxed costs are $424,700, and the sales mox is 30% bats and 70% gloves. The unit selling price and the unit variable cost for each product are as follows: Products Unit Selling Price Unit Variable Cost Bats $40 $30 Gloves 100 60 a. Compute the break-even sales (units) for the overall enterprise product, E. units b. How many units of each product, baseball bats and baseball gloves, would be sold at the break-even point? Baseball bats units Baseball gloves units Check My Work Previous Next Margin of Safety a. If Canace Company, with a break-even point at $456,500 of sales, has actual sales of $550,000, what is the margin of safety expressed (1) in dollars and (2) as a percentage of sales? Round the percentage to the nearest whole number 1. 2. b. If the margin of safety for Canace Company was 35%, fixed costs were $1,724,450, and variable costs were 65% of sales, what was the amount of actual sales (dollars)? (Hint: Determine the break even in sales dollars first.)
