What is McDonald’s contribution margin

For a recent year, McDonald’s company-owned restaurants had the following sales and expenses (in millions):

Sales

$ 18,602.5

Food and packaging

$ 6,318.2

Payroll

4,710.3

Occupancy (rent, depreciation, etc.)

4,195.2

General, selling, and administrative

2,445.2

17,668.9

Income from operations

$ 933.6

Answer the following questions:Assume that the variable costs consist of food and packaging, payroll, and 40% of the general, selling, and administrative expenses.

1. What is McDonald’s contribution margin? (Round your answer to the nearest tenth of one decimal place.)

2. What is McDonald’s contribution margin ratio? (Round your answer to one decimal place.)

3. How much would income from operations increase if same-store sales increased by $900 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]).

…………………..Answer preview……………………

Contribution margin (CM) is the amount by which sale revenue exceeds variable costs. It is calculated using the formula;

Total sales revenue – variable costs

Contribution margin ratio (CMR) shows how the contribution margin is affected by a given change in total sales and it is therefore obtained by dividing……………………

APA

287 words

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