Question
Contribution Margin and Contribution Margin Ratio For a recent year, McDonald's (MCD) company-owned restaurants had the following sales and expenses (in millions): Sales by company
Contribution Margin and Contribution Margin Ratio
For a recent year, McDonald's (MCD) company-owned restaurants had the following sales and expenses (in millions):
Sales by company operated restaurants | $12,719 | |
Food and paper | $4,034 | |
Payroll and employee benefits | 3,529 | |
Occupancy and other expenses | 2,848 | |
Selling, general, and administrative expenses | 2,231 | |
Other operating income | (1,163) | |
Net operating expenses | (11,479) | |
Operating income (loss) | $1,240 |
Assume that the variable costs consist of food and paper, payroll and employee benefits, and 35% of the selling, general, and administrative expenses.
a. What is McDonald's contribution margin? Enter your answer in million, rounded to the nearest million. $ million
b. What is McDonald's contribution margin ratio? Round your percentage answer to one decimal place. %
c. Use the rounded contribution margin ratio value to answer the following question: how much would operating income increase if same-store sales increased by $250 million for the coming year, with no change in the contribution margin ratio or fixed costs? $ million
d. What would have been the operating income or loss for the recent year if sales had been $250 million more? $ million
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