What is McDonald’s contribution margin

| September 13, 2016

Question
For a recent year, McDonald’s company-owned restaurants had the following sales and expenses (in millions):

Sales

$ 18,602.5

Food and packaging

$ 6,318.2

Payroll

4,710.3

Occupancy (rent, depreciation, etc.)

4,195.2

General, selling, and administrative

2,445.2

17,668.9

Income from operations

$ 933.6

Assume that the variable costs consist of food and packaging, payroll, and 40% of the general, selling, and administrative expenses.

Answer the following questions:

What is McDonald’s contribution margin? (Round your answer to the nearest tenth of one decimal place.)
What is McDonald’s contribution margin ratio? (Round your answer to one decimal place.)
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]).

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