For a recent year, McDonald's Company-owned restaurants had the following sales and expenses (in millions) : Sales $25,700 Food and packaging $8,982 Payroll 6,500 Occupancy (rent, depreciation, etc.) 5,748 General, selling, and administrative expenses 3,700 $24,930 Income from operations $770 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

Question

Business

Charlie Walter

29 September, 10:20

For a recent year, McDonald's Company-owned restaurants had the following sales and expenses (in millions) : Sales $25,700 Food and packaging $8,982 Payroll 6,500 Occupancy (rent, depreciation, etc.) 5,748 General, selling, and administrative expenses 3,700 $24,930 Income from operations $770 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

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Answers (1)

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Anne Harris · Answer 1

a. $9,338

b. 0.363

Explanation:

a. Contribution Margin = Sales - Variable Cost

Where Sales = $25,700

Variable Cost = Food & Packaging + Payroll + 40% x General, Selling and Administrative expenses

V. C. = 8,982 + 6,500 + 40% * 3,700

V. C = 8,982 + 6,500 + 1,480

= $16,362

Therefore, Contribution Margin = Sales - Variable Cost

= $25,700 - $16,362

=$9,338

b. McDonald's contribution margin ratio = Contribution Margin / Sales

= $9,338 / $25,700

= 0.363