Question

Contribution Margin and Contribution Margin Ratio For a recent year, Wicker Company-owned restaurants had the following sales and expenses (in millions): Sales $33,700 Food and packaging $8,412 Payroll 8,500 Occupancy (rent, depreciation, etc.) 10,878 General, selling, and administrative expenses 4,900 $32,690 Income from operations $1,010 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 $2,000 million for the coming year, with no change in the contribution margin ratio or fixed costs? Round your answer to the closest million. $ million Help please.

Answer 1

			Total	Variable	Fixed
		Sales	33,700
		Foods & Packaging (Variable)	8,412	8,412
		Payroll (Variable)	8,500	8,500
		Occupancy (Fixed)	10,878		10,878
		S&A Ex (40% Variable/60% Fixed)	4,900	1,960	2,940
			32,690	18,872	13,818
	A	Sales	33,700
		Less: Variable Costs:
		Foods & Packaging	8,412
		Payroll	8,500
		Occupancy	-
		S&A Ex	1,960
		Contribution Margin	14,828
	B	Contribution Margin Ratio	44.00%	(14828/33700)
		(Contribution Margin/Sales)
	C	Sales	33,700
		Add: Increase in Sales	2,000
		Revised Sales	35,700	B
		Contribution Margin Ratio	44.00%	A
		Contribution Margin	15,708	A*B
		Less: Fixed Cost	13,818
		Net Income	1,890