Question

Contribution Margin and Contribution Margin Ratio For a recent year, McDonald's company-owned restaurants had the following sales and expenses (in millions): Sales $18,169.3 Food and packaging $ 6,129.7 Payroll 4,756.0 Occupancy (rent, depreciation, etc.) 4,402.6 General, selling, and administrative expenses 2,487.9 17,776.2 Income from operations $ 393.1 Assume that the variable costs consist of food and packaging; payroll; and 40% of the general, selling, and administrative expenses.

Answer 1

Answer:

The Contribution Margin and Contribution Margin Ratio is $6,288.14 millions and 34.61% respectively.

Explanation:

The computation of the contribution margin and the contribution margin ratio is shown below:

= Sales - Food and packaging -  Payroll -  40% of General, selling, and administrative expenses

= $18,169.3 - $6,129.70 - $4,756 - 40% × 2,487.9

=  $18,169.3 - $6,129.70 - $4,756 - $995.16

= $6,288.14 millions

Now the contribution margin ratio equals to

= (Contribution margin ÷ sales) × 100

= ($6,288.44 ÷ $18,169.3) × 100

= 34.61%