Managerial Accounting
15th Edition
ISBN: 9781337912020
Author: Carl Warren, Ph.d. Cma William B. Tayler
Publisher: South-Western College Pub
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Textbook Question
Chapter 6, Problem 10E
Contribution margin and contribution margin ratio
For a recent year, McDonald’s (MCD) 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 McDonald’s contribution margin ratio? Round to one decimal place.
- c. How much would operating income increase if same-store sales increased by $800 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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Chapter 6 Solutions
Managerial Accounting
Ch. 6 - Describe how total variable costs and unit...Ch. 6 - Which of the following costs would be classified...Ch. 6 - Describe how total fixed costs and unit fixed...Ch. 6 - Prob. 4DQCh. 6 - Prob. 5DQCh. 6 - Prob. 6DQCh. 6 - Prob. 7DQCh. 6 - Prob. 8DQCh. 6 - Prob. 9DQCh. 6 - What does operating leverage measure, and how is...
Ch. 6 - High-low method The manufacturing costs of...Ch. 6 - Contribution margin Waite Company sells 250,000...Ch. 6 - Prob. 3BECh. 6 - Prob. 4BECh. 6 - Prob. 5BECh. 6 - Operating leverage Haywood Co. reports the...Ch. 6 - Margin of safety Jorgensen Company has sales of...Ch. 6 - Classify Costs Following is a list of various...Ch. 6 - Identify cost graphs The following cost graphs...Ch. 6 - Identify activity bases For a major university,...Ch. 6 - Prob. 4ECh. 6 - Identify fixed and variable costs Intuit Inc....Ch. 6 - Relevant range and fixed and variable costs Child...Ch. 6 - High-low method Ziegler Inc. has decided to use...Ch. 6 - Prob. 8ECh. 6 - Contribution margin ratio Young Company budgets...Ch. 6 - Contribution margin and contribution margin ratio...Ch. 6 - Prob. 11ECh. 6 - Break-even sales Anheuser-Busch InBev SA/NV (BUD)...Ch. 6 - Prob. 13ECh. 6 - Prob. 14ECh. 6 - Prob. 15ECh. 6 - Break-even analysis for a service company3 Sprint...Ch. 6 - Prob. 17ECh. 6 - Prob. 18ECh. 6 - Prob. 19ECh. 6 - Prob. 20ECh. 6 - Prob. 21ECh. 6 - Prob. 22ECh. 6 - Prob. 23ECh. 6 - Prob. 24ECh. 6 - Prob. 25ECh. 6 - Classify costs Seymour Clothing Co. manufactures a...Ch. 6 - Break-even sales under present and proposed...Ch. 6 - Prob. 3PACh. 6 - Prob. 4PACh. 6 - Prob. 5PACh. 6 - Contribution margin, break-even sales,...Ch. 6 - Classify costs Cromwell Furniture Company...Ch. 6 - Prob. 2PBCh. 6 - Prob. 3PBCh. 6 - Prob. 4PBCh. 6 - Prob. 5PBCh. 6 - Contribution margin, break-even sales,...Ch. 6 - Analyze Global Airs cost-volume-profit...Ch. 6 - Prob. 2MADCh. 6 - Prob. 3MADCh. 6 - Prob. 4MADCh. 6 - Prob. 1TIFCh. 6 - Prob. 3TIFCh. 6 - Profitability strategies Somerset Inc. has...Ch. 6 - Prob. 5TIFCh. 6 - Analysis of costs for a shipping department Sales...Ch. 6 - Taylor Corporation is analyzing the cost behavior...Ch. 6 - Prob. 2CMACh. 6 - Bolger and Co. manufactures large gaskets for the...Ch. 6 - Prob. 4CMA
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- Klamath Company produces a single product. The projected income statement for the coming year is as follows: Required: 1. Compute the unit contribution margin and the units that must be sold to break even. 2. Suppose 10,000 units are sold above break-even. What is the operating income? 3. Compute the contribution margin ratio. Use the contribution margin ratio to compute the break-even point in sales revenue. (Note: Round the contribution margin ratio to four decimal places, and round the sales revenue to the nearest dollar.) Suppose that revenues are 200,000 more than expected for the coming year. What would the total operating income be?arrow_forwardFaldo Company produces a single product. The projected income statement for the coming year, based on sales of 200,000 units, is as follows: Required: 1. Compute the unit contribution margin and the units that must be sold to break even. Suppose that 30,000 units are sold above the break-even point. What is the profit? 2. Compute the contribution margin ratio and the break-even point in dollars. Suppose that revenues are 200,000 greater than expected. What would the total profit be? 3. Compute the margin of safety in sales revenue. 4. Compute the operating leverage. Compute the new profit level if sales are 20 percent higher than expected. 5. How many units must be sold to earn a profit equal to 10 percent of sales? 6. Assume the income tax rate is 40 percent. How many units must be sold to earn an after-tax profit of 180,000?arrow_forwardCadre, Inc., sells a single product with a selling price of $120 and variable costs per unit of $90. The companys monthly fixed expenses are $180,000. What is the companys break-even point in units? What is the companys break-even point in dollars? Prepare a contribution margin income statement for the month of October when they will sell 10,000 units. How many units will Cadre need to sell in order to realize a target profit of $300,000? What dollar sales will Cadre need to generate in order to realize a target profit of $300,000? Construct a contribution margin income statement for the month of August that reflects $2,400,000 in sales revenue for Cadre, Inc.arrow_forward
- Cost-Volume-Profit, Margin of Safety Victoria Company produces a single product. Last years income statement is as follows: Required: 1. Compute the break-even point in units and sales dollars calculated using the break-even units. 2. What was the margin of safety for Victoria last year in sales dollars? 3. Suppose that Victoria is considering an investment in new technology that will increase fixed cost by 250,000 per year but will lower variable costs to 45% of sales. Units sold will remain unchanged. Prepare a budgeted income statement assuming that Victoria makes this investment. What is the new break-even point in sales dollars, assuming that the investment is made?arrow_forwardMargin of safety Jorgensen Company has sales of 380,000,000, and the break-even point in sales dollars is 323,000,000. Determine Jorgensen Companys margin of safety as a percent of current sales.arrow_forwardContribution margin, break-even sales, cost-volume-profit chart, margin of safety, and operating leverage Belmain Co. expects to maintain the same inventories at the end of 20Y7 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during the year. A summary report of these estimates is as follows: It is expected that 12,000 units will be sold at a price of 240 a unit. Maximum sales within the relevant range are 18,000 units. Instructions 1. Prepare an estimated income statement for 20Y7. 2. What is the expected contribution margin ratio? 3. Determine the break-even sales in units and dollars. 4. Construct a cost-volume-profit chart indicating the break-even sales. 5. What is the expected margin of safety in dollars and as a percentage of sales? (Round to one decimal place.) 6. Determine the operating leverage.arrow_forward
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