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Contribution margin and contribution margin ratio For a recent year, McDonalds (MCD) company-owned restaurants had...

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Accounting

Contribution margin and contribution margin ratio

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

Line Item Description Amount
Sales $20,000
Food and paper $(2,800)
Payroll and employee benefits (2,300)
Occupancy and other expenses (4,300)
General, selling, and administrative expenses (4,600)
Total $(14,000)
Operating income $6,000

Assume that the variable costs consist of food and paper, payroll, 25% of occupancy and other expenses, and 40% of the general, selling, and administrative expenses.

a. What is McDonald's contribution margin? $ _____ million

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

c. How much would operating income 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). $ _____ million

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