Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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 $20,000
Food and paper $(2,800)
Payroll and employee benefits (2,300)
Occupancy and other expenses (4,300)
General, selling, and administrative expenses (4,600)
Total $(14,000)
Operating income $6,000

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? $______ million

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 $900 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). $ ______ million

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Understand Accounting

Authors: Claude Hitching, Derek Stone

1st Edition

0273018833, 978-0273018834

More Books

Students also viewed these Accounting questions

Question

Find dy/dx for y = x (3x + 2).

Answered: 1 week ago

Question

What do you mean by dual mode operation?

Answered: 1 week ago

Question

Explain the difference between `==` and `===` in JavaScript.

Answered: 1 week ago