From the course: Accounting Foundations: Cost-Based Pricing Strategies
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The clever bundling of the Big Mac meal
From the course: Accounting Foundations: Cost-Based Pricing Strategies
The clever bundling of the Big Mac meal
- If you go into McDonald's and you got $5 in your pocket, how does McDonald's want you to spend that $5? Well, do this experiment. Walk into McDonald's and say, Please give me a Big Mac. Always, the cashier will ask you, Would you like any french fries with that? Would you like a drink? Why does a cashier choose these two items, french fries and a drink? Well, because both of these items have contribution margin ratios, ignoring labor, of over 90%. Contribution margin is the difference between the selling price and the immediate cost of providing the item. In a restaurant setting, the contribution margin is the difference between the selling price and the materials cost of the food item. In a retail setting, the contribution margin is the difference between the retail selling price and the wholesale purchase cost. So when you pay McDonald's $1 for french fries or a soft drink, McDonald's has to pay about 10…
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