ASKER’S NOTE: NEED HELP WITH“C” For a recent year, McDonald’s had the following
ID: 2457878 • Letter: A
Question
ASKER’S NOTE: NEED HELP WITH“C”
For a recent year, McDonald’s had the following sales andexpenses (in millions):
Sales 15,352
Food andpackaging 5,204
Payroll 4,040
Occupancy (rent, depreciation,etc) 1,022
General, selling, and administrativeexpenses 2,220
12,486
Income fromoperations 2,866
Assume that the variable costs consist of food and packaging,payroll, and 40% of the general, selling, and administrativeexpenses.
Sales – Variable costs
Variable costs
Food andpackaging 5,204
Payroll 4,040
40% of Gen./Sell./Admin. 888
Total variablecosts 10,132
Sales – Variable costs = 15,352 – 10,132 =5,220
Contribution margin / sales x 100 = 5,220 / 15,352 x 100 =34%
Explanation / Answer
Part C Sales increased by 450 M 15,352 + 450 = 15,802 M Contribution Margin is 34 % Therefore , 15,802 * 34 % = 5,373. Plug in the values into the formula to find the variable costs. Sales - variable costs = CM 15,802 - VC = 5,373 Vc = 15,802 - 5,373 = 10,429 Fixed costs Rent , dep - 1,022 60% of SGA 2,220*60% 1,322 TotalFC 2,344 Calculation of Income from operations Sales 15,802 Variable costs 10,429 CM 5,373 - Fixed costs 2,344 Income from operations 3,029