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Social ScienceContribution Margin and Contribution Margin RatioFor a recent year, Wicker Company-owned restaurants had the following sales and expenses (in millions):Sales$31,900Food and packaging$9,619Payroll8,000Occupancy (rent, depreciation, etc.)8,721General, selling, and administrative expenses4,600$30,940Income from operations$960Assume that the variable costs consist of food and packaging, payroll, and 40% of the general, selling, and administrative expenses.a. What is Wicker Company's contribution margin? Round to the nearest million. (Give answer in millions of dollars.)millionb. What is Wicker Company's contribution margin ratio? Round to one decimal place.c. How much would income from operations increase if same-store sales increased by $1,900 million for the coming year, with no change in thecontribution margin ratio or fixed costs? Round your answer to the closest million.million
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Contribution Margin and Contribution Margin Ratio For a recent year, Wicker Company-owned restaurants had the following sales and expenses (in millions): Sales $31,900 Food and packaging $9,619 Payroll 8,000 Occupancy (rent, depreciation, etc.) 8,721 General, selling, and administrative expenses 4,600 $30,940 Income from operations $960 Assume that the variable costs consist of food and packaging, payroll, and 40% of the general, selling, and administrative expenses. a. What is Wicker Company's contribution margin? Round to the nearest million. (Give answer in millions of dollars.) million b. What is Wicker Company's contribution margin ratio? Round to one decimal place. c. How much would income from operations increase if same-store sales increased by $1,900 million for the coming year, with no change in the contribution margin ratio or fixed costs? Round your answer to the closest million. million
Expert Answer
Contribution margin is calculated by subtracting variable expenses from the sales revenue of a company. Contribution margin includes profit of a company and fixed cost.
part (a)
If variable cost consists of payroll, food & packaging and 40% of general, selling & administrative expenses then contribution margin of W’s company is calculated as follows:
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Amount ($ (in million) Particular Amount (S) (in million) Sales 31,900 Less: variable cost Food& packaging pаyroll General Selling & administrative expenses (40%x4,600) Total variable cost Contribution margin (sales-variable cost) 9,619 8,000 1,840 19,459 12,441
Part (b)
W’s contribution margin ra...
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contribution margin -x 100 Contribution margin ratio total sales $12,441 x100 $31,900 = 39%
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