# Contribution Margin and Contribution Margin Ratio For a recent year, McDonald's company-owned restaurants had the following...

Contribution Margin and Contribution Margin Ratio For a recent year, McDonald's 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 \$18,169.3 \$ 6,129.7 4,756.0 4,402.6 2,48179 17,776.2 \$ 393.1 Income from operations 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 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) op ^ 9:13 AM 49 28/2020
b. What is McDonald's contribution margin ratio? Round 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

Answer A. Mcdonald contribution is \$ 6288 million (As per Sheet enclosed in last)

Answer B. Mcdonald contribution margin is 34.61% (As per Sheet enclosed in last)

Answer C. If same store sales increased by \$ 500 million in coming year than the Income from operation will increase by \$173.05 million.

WORKING SHEET

 Mcdonald Ratio's IN MILLIONS IF SALES INCREASED BY 500 M SALES 18169.30 18669.30 TOTAL A 18169.30 18669.30 LESS VARIABLE COST: FOOD & PACKAGING 6129.70 PAYROLL 4756.00 GEN.,SELLING, & ADM EXP (40%) OF 2487.90 995.16 TOTAL B 11880.86 CONTRIBUTION A-B 6288.44 6461.4913 CONTRIBUTION IN % 34.61024916 34.610249 FIXED EXPENSES OCCUPANCY (RENT & DEP.) 4402.60 GEN. SELLING & ADM EXP. 60% 1492.74 (TOTAL EXP ARE 2487.90 MILLION) TOTAL C 5895.34 5895.34 NET PROFIT 393.10 566.15 increasae in profits will be 173.05
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