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. 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? d. What would have been the operating income or loss for the recent year if sales had been $250 million more?
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.
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.
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?
d. What would have been the operating income or loss for the recent year if sales had been $250 million more?
Sidenote: I have already asked this question and the answer provided was incorrect please make sure it's the right answer.
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