For a recent year, McDonald's company-owned restaurants had the following sales and expenses (in millions): Sales $12,718.9 Food and packaging $4,033.5 Payroll 3,528.5 Occupancy (rent, depreciation, etc) 2,847.6 General, selling, and administrative expenses 2,231.3 12,640.9 Income from operations $78.0 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 tenth of a million (one decimal place). $__ million b. What is McDonald's contribution margin ratio? Round your answer to one decimal place. __ % c. How much would income from operations increase if same-store sales increased by $500 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).
Contribution Margin and Contribution Margin Ratio
For a recent year, McDonald's company-owned restaurants had the following sales and expenses (in millions):
| Sales | $12,718.9 |
| Food and packaging | $4,033.5 |
| Payroll |
3,528.5 |
| Occupancy (rent, |
2,847.6 |
| General, selling, and administrative expenses | 2,231.3 |
| 12,640.9 | |
| Income from operations | $78.0 |
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 tenth of a million (one decimal place).
$__ million
b. What is McDonald's contribution margin ratio? Round your answer to one decimal place.
__ %
c. How much would income from operations increase if same-store sales increased by $500 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
Variable general, selling, and administrative expenses = Total general, selling, and administrative expenses x 40%
= $2,231.3 x 40%
= $892.52
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