For a recent year, McDonald's (MCD) company-owned restaurants had the following sales and expenses (in millions): Sales Food and packaging Payroll Occupancy (rent, depreciation, etc.) General, selling, and administrative expenses $20,100 $(6,604) (5,100) (4,896) (2,900) $(19,500) $600 Operating income 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.) million b. What is McDonald's contribution margin ratio? % c. How much would operating income increase if same- store sales increased by $1,200 million for the coming year, with no change in the contribution margin ratio or fixed costs? Round your answer to the closest million.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Workings :-
1) Calculation of variable costs :-
Foods and packaging + payroll + (general, selling and administrative expenses * 40%)
= $6,604 + $5,100 + ($2,900 * 40%)
= $6,604 + $5,100 + $1,160
= $12,864 (in millions)
2) Calculation of Fixed costs :-
Occupancy + (Total general, selling and administrative expenses - variable general, selling and administrative expenses)
= $4,896 + ($2,900 - $1,160)
= $4,896 + $1,740
= $6,636 (in millions)
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