Question

For a recent year, Wicker Company-owned restaurants had the following sales and expenses (in millions):

Sales	$36,700
Food and packaging	$11,334
Payroll	9,300
Occupancy (rent, depreciation, etc.)	9,666
General, selling, and administrative expenses	5,300
	$35,600
Income from operations	$1,100

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

a. What is Wicker Company's contribution margin? Round to the nearest million. (Give answer in millions of dollars.)
$ million

b. What is Wicker Company's contribution margin ratio? Round to one decimal place.
%

c. How much would income from operations increase if same-store sales increased by $2,200 million for the coming year, with no change in the contribution margin ratio or fixed costs? Round your answer to the closest million.
$ million

Answer 1

1
Sales	36700
Less: Variable costs
Food and packaging	11334
Payroll	9300
General, selling, and administrative expenses	2120	=5300*40%
Total variable costs	22754
Contribution margin	13946	million
2
Contribution margin	13946
Divide by Sales	36700
Contribution margin ratio	38%
3
Increase in sales	2200
X Contribution margin ratio	38%
Income from operations increase	836	million