Marketing Math Worksheet Solution

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.

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

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.