Question

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

Contribution Margin and Contribution Margin Ratio

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.
\$ 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?
\$ million

d. What would have been the operating income or loss for the recent year if sales had been \$250 million more?
\$ million

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