Join Jim Stice for an in-depth discussion in this video McDonald's breakeven point, part of Running a Profitable Business: Calculating Breakeven.
- The Golden Arches, Mcdonald's,…I don't think I know anyone…who hasn't had a meal at Mcdonald's.…They are everywhere and of late they're doing quite well.…We are going to use our knowledge of CVP analysis…to explain some of the rationale behind…some of the decisions that Mcdonald's makes.…This analysis applies to all companies…operating in the fast food space,…but we will use Mcdonald's because well it's Mcdonald's.…First of all, to keep things simple…we're going to focus on Mcdonald's core products,…hamburgers, fries and drinks.…
Sure they sell nuggets and they sell fish fillet…and they sell breakfast, but at their core…Mcdonald's sells burgers, fries and drinks.…Turns out you can go out on the Internet…and find out a lot of things.…One thing you can find out is the contribution margin…on burgers, fries, and drinks.…Did you know that the contribution margin…on a burger is about 50%,…the contribution margin on fries is a bout 75%,…and the contribution margin on drinks is close to 90%.…With that knowledge, it makes you wonder…
Want to learn more? Learn about three types of accounting—financial, managerial, and income tax—in their Accounting Fundamentals course.
- Breaking down fixed and variable costs
- Pricing a service to cover costs
- Identifying high contribution margins
- Calculating a company's breakeven point
- Conducting breakeven analysis with breakeven equations
- Computing target net income
- Exploring sensitivity analysis