For a recent year, McDonald's company-owned restaurants had the following sales and expenses (in millions):Sales $ 18,602.5Food and packaging $ 6,318.2Payroll 4,710.3Occupancy (rent, depreciation, etc.) 4,195.2General, selling, and administrative expenses 2,445.217,668.9Income from operations $ 933.6Assume 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.

Contribution margin or dollar contribution per unit, is the selling price per unit minus the variable cost per unit. "Contribution" represents the portion of sales revenue that is not consumed by variable costs and so contributes to the coverage of fixed costs.

How to calculate contribution margin of the company?

Sales $18,602.5

Less : variable costs

Food & packaging $ 6,318.2

Payroll $ 4,710.3

General, selling, and administrative expenses

(2,445.2 millions X 40%) $ 978.08

Contribution margin $ 6,595.92

How to calculate contribution margin ratio of the company?
Contribution margin ratio = contribution margin / sales

= 6,595.92 million / 18,602.5 million

= 35.5% (rounded)

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