For a recent year, McDonald’s (MCD) company-owned restaurants had the following sales and expenses (in millions): Sales $24,100  Food and packaging $(10,334) Payroll (6,100) Occupancy (rent, depreciation, etc.) (3,446) General, selling, and administrative expenses (3,500)   $(23,380) Operating income $720 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.) 6,266  million b.  What is McDonald's contribution margin ratio? 26 % c.  How much would operating income increase if same-store sales increased by $1,400 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

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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For a recent year, McDonald’s (MCD) company-owned restaurants had the following sales and expenses (in millions):

Sales $24,100 
Food and packaging $(10,334)
Payroll (6,100)
Occupancy (rent, depreciation, etc.) (3,446)
General, selling, and administrative expenses (3,500)
  $(23,380)
Operating income $720

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.)
6,266  million

b.  What is McDonald's contribution margin ratio?
26 %

c.  How much would operating income increase if same-store sales increased by $1,400 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

Expert Solution
Step 1 Introduction

The contribution margin is calculated as difference between sales and variable costs. 

The contribution margin ratio is calculated as contribution margin divided by sales revenue. 

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