Bundle: Managerial Accounting, Loose-leaf Version, 14th - Book Only
14th Edition
ISBN: 9781337541398
Author: Carl Warren; James M. Reeve; Jonathan Duchac
Publisher: Cengage Learning
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Chapter 5, Problem 10E
A.
To determine
Contribution Margin: It is defined as the difference between the sales and the variable cost.
Contribution Margin ratio: It is a ratio that measures the contribution margin generated by the company from the sales to make it avialable for paying the fixed cost and generate a profit. It is expressed as percentage of margin available from each dollar sales to pay fixed expenses and to provide profit. It is also called as profit-volume ratio. The formula to calculate the contribution margin ratio is as follows:
contribution margin for M Company.
B.
To determine
contribution margin ratio for M Company.
C.
To determine
the increase in income from operations.
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Contribution Margin and Contribution Margin Ratio
For a recent year, McDonald's company-owned restaurants had the following sales and expenses (in millions):
Sales
$12,718.9
Food and packaging
$ 4,033.5
Payroll
3,528.5
Occupancy (rent, depreciation, etc.)
2,847.6
General, selling, and administrative expenses
2,231.3
12,640.9
Income from operations
$ 78.0
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).
million
b. What is McDonald's contribution margin ratio? Round your answer to one decimal place.
%
c. How much would income from operations increase if same-store sales increased by $500 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).
million
Contribution Margin and Contribution Margin Ratio
For a recent year, McDonald's company-owned restaurants had the following sales and expenses (in millions):
Sales
$12,718.9
Food and packaging
$ 4,033.5
Payroll
3,528.5
Occupancy (rent, depreciation, etc.)
2,847.6
General, selling, and administrative expenses
2,231.3
12,640.9
Income from operations
$ 78.0
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 McDonald's contribution margin ratio? Round your answer to one decimal place. %
c. How much would income from operations increase if same-store sales increased by $500 million for the coming year, with no change in the contribution margin ratio or fixed costs? Round your answer to the nearest tenth of a million (one decimal place).$
Incorrect…
Contribution Margin and Contribution Margin Ratio
For a recent year, McDonald's company-owned restaurants had the following sales and expenses (in millions):
Sales
$12,718.9
Food and packaging
$ 4,033.5
Payroll
3,528.5
Occupancy (rent, depreciation, etc.)
2,847.6
General, selling, and administrative expenses
2,231.3
12,640.9
Income from operations
$ 78.0
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).
$ 4,264.4 V million
b. What is McDonald's contribution margin ratio? Round your answer to one decimal place.
33.5 v %
c. How much would income from operations increase if same-store sales increased by $500 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).
89.5 x million
Chapter 5 Solutions
Bundle: Managerial Accounting, Loose-leaf Version, 14th - Book Only
Ch. 5 - Describe how total variable costs and unit...Ch. 5 - Which of the following costs would be classified...Ch. 5 - Describe how total fixed costs and unit fixed...Ch. 5 - Prob. 4DQCh. 5 - Prob. 5DQCh. 5 - Prob. 6DQCh. 5 - Prob. 7DQCh. 5 - Prob. 8DQCh. 5 - Prob. 9DQCh. 5 - What does operating leverage measure, and how is...
Ch. 5 - Prob. 1BECh. 5 - Prob. 2BECh. 5 - Prob. 3BECh. 5 - Prob. 4BECh. 5 - Prob. 5BECh. 5 - Prob. 6BECh. 5 - Prob. 7BECh. 5 - Classify Costs Following is a list of various...Ch. 5 - Identify cost graphs The following cost graphs...Ch. 5 - Identify activity bases For a major university,...Ch. 5 - Prob. 4ECh. 5 - Identify fixed and variable costs Intuit Inc....Ch. 5 - Prob. 6ECh. 5 - High-low method Ziegler Inc. has decided to use...Ch. 5 - Prob. 8ECh. 5 - Contribution margin ratio Young Company budgets...Ch. 5 - Prob. 10ECh. 5 - Prob. 11ECh. 5 - Prob. 12ECh. 5 - Prob. 13ECh. 5 - Prob. 14ECh. 5 - Prob. 15ECh. 5 - Prob. 16ECh. 5 - Prob. 17ECh. 5 - Prob. 18ECh. 5 - Prob. 19ECh. 5 - Prob. 20ECh. 5 - Prob. 21ECh. 5 - Prob. 22ECh. 5 - Prob. 23ECh. 5 - Prob. 24ECh. 5 - Prob. 25ECh. 5 - Classify costs Seymour Clothing Co. manufactures a...Ch. 5 - Prob. 2PACh. 5 - Prob. 3PACh. 5 - Prob. 4PACh. 5 - Prob. 5PACh. 5 - Contribution margin, break-even sales,...Ch. 5 - Classify costs Cromwell Furniture Company...Ch. 5 - Prob. 2PBCh. 5 - Prob. 3PBCh. 5 - Prob. 4PBCh. 5 - Prob. 5PBCh. 5 - Contribution margin, break-even sales,...Ch. 5 - Prob. 1ADMCh. 5 - Prob. 2ADMCh. 5 - Prob. 3ADMCh. 5 - Prob. 1TIFCh. 5 - Prob. 3TIF
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