For a recent year, Wicker Company-owned restaurants had the following sales and expenses (in...

Question:

For a recent year, Wicker Company-owned restaurants had the following sales and expenses (in millions):

Sales $19,100

Food and packaging $7,641

Payroll 4,800

Occupancy (rent, depreciation, etc.) 3,289

General, selling, and administrative expenses 2,800

$18,530

Income from operations$570

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 $1,100 million for the coming year, with no change in the contribution margin ratio or fixed costs? Round your answer to the closest million.

$ million

Contribution Margin:

The contribution margin refers to the margin, which denotes the amount of money that is available to pay a certain amount of fixed cost, which includes utilities, rent, etc. which must be paid even when the output from the business is zero.

Answer and Explanation:

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a)

Particulars Amount ($) Amount ($)
Sales 19,100
Less: Variable costs
Food...

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Contribution Margin: Definition & Formula

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Chapter 22 / Lesson 20
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The contribution margin is the selling price of a product less the variable cost per unit. It's also an indicator of how much more is needed to cover the fixed expenses. Calculate contribution margin in the examples provided after learning the definition and formula.


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