1. Create an MCS from the information found on a fast food restaurant’s income statement:

                                           (in millions)

Sales:                                                              $450

Cost of Goods Sold:

Management salaries              31.7

Crew salaries                          27.6

Food                                     153.0

Packaging (food)                    10.6

Total Cost of Goods Sold:                             222.9

Operating Expenses:

Rent                                       93.0

Real Estate Taxes                   1.7

Royalty (to franchisor)           15.0

Insurance                                2.3

Office Expense                       9.6

Advertising and promotion    27.3

Miscellaneous                        20.1

Depreciation                           9.7

Total Operating Expenses:                            178.7

 

Operating Profit Before Tax:                          48.4

 

(a) Create a total-dollars MCS (through NMC, including % for GMC, PGMMC, NMC) from the information found on the income statement. Note that you should not rely on the “categories” above (e.g., Cost of Good Sold), but rather on how each expense “acts.”

(in millions)

Revenue:                                                        $450

Cost of Goods Sold:

Crew salaries                          27.6

Food                                     153

Packaging (food)                    10.6

Royalty (to franchisor)           15

Total Cost of Goods Sold:                              $206.2

Gross Marketing Contribution:                      $243.8 (54.17%)

Programmed Costs:

            Advertising and promotion                   27.3 (6%)

Net Marketing Contribution:                          $216.5 (48%)

 

 

 

(b) Convert (a) into a per-unit MCS, assuming that an average “meal” generates $10 in revenue for the restaurant.

 

(c) How many additional “meals” would the restaurant have to sell to cover a $3,500,000 increase in advertising?

 

 

(d) What percent increase in sales does your answer to (c) represent?

 

 

2. Assume the restaurant from question 1 wants to switch to organic ingredients that cost more, but would allow it to raise price. If costs would increase by 15% and the price could rise by 30%, by how many meals can/must sales change?

Sales (circle one) Must Increase / Can Decrease   by _____________ meals.