Accounting 26th Edition by Carl Warren ,Jim Reeve ,Jonathan Duchac

Exercise 3

Contribution margin and contribution margin ratio
For a recent year, McDonald's company-owned restaurants had the following sales and expenses (in millions):

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 Round to the nearest tenth of a million (one decimal place).
b. What is McDonalds contribution margin ratio Round to one decimal place.
c. How much would income from operations 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).