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 $41,100 Food and packaging $(13,504) Payroll (10,400) Occupancy (rent, depreciation, etc.) (9,966) General, selling, and administrative expenses (6,000) $(39,870) Operating income $1,230 Assume that the variable costs consist of food and packaging, payroll, and 40% of the general, selling, and administrative expenses. a. What is McDonald's contribution margin? Round to the nearest million. (Give answer in millions of dollars.) $fill in the blank 1 million b. What is McDonald's contribution margin ratio? fill in the blank 2 % c. How much would operating income increase if same-store sales increased by $2,500 million for the coming year, with no change in the contribution margin ratio or fixed costs? Round your answer to the closest million. $fill in the blank 3 million
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
25.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 | $41,100 |
| Food and packaging | $(13,504) |
| Payroll | (10,400) |
| Occupancy (rent, |
(9,966) |
| General, selling, and administrative expenses | (6,000) |
| $(39,870) | |
| Operating income | $1,230 |
Assume that the variable costs consist of food and packaging, payroll, and 40% of the general, selling, and administrative expenses.
a. What is McDonald's contribution margin? Round to the nearest million. (Give answer in millions of dollars.)
$fill in the blank 1 million
b. What is McDonald's contribution margin ratio?
fill in the blank 2 %
c. How much would operating income increase if same-store sales increased by $2,500 million for the coming year, with no change in the contribution margin ratio or fixed costs? Round your answer to the closest million.
$fill in the blank 3 million
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