LOVE McDonalds - Research Paper Example

McDonalds 22 February McDonalds McDonalds is a fast food company that operates both in its United s’ domestic marketand in foreign countries. In the company’s latest and published financial reports, its operating margins improved from the value in the year 2009 to almost 20 %. Operated margins measure the ratio of operating profit to net sales. This measure is an indicator of the ratio of operation cost and sales since operating profits are derived from operating cost and net sales. This paper seeks to explore possible cost items that influenced the ratio of operating cost to net sales in the year’s financial report.

The company as a whole, cost items that had favorable and unfavorable variance on the ratioFrom the company’s overall operating results, impairment and other charges (credits) is the cost item that favorably contributed to the better operating cost to net sales ratio. This is because the other cost items increased from the year 2009 to the year 2010. They would therefore unfavorably contribute the variance with restaurant expenses having the highest unfavorable contribution (McDonalds, n.d.). U.S.

stores, cost items that had favorable and unfavorable variance on the ratioThe company’s operated margin in the United States was favored by low costs of raw materials. High cost of labor however unfavorably affected the variance by increasing operating cost (McDonalds, n.d.).Europe stores, cost items that had favorable and unfavorable variance on the ratioSimilarly, the favorable variance in the company’s European market was due to low cost of raw materials. Higher cost of human resource however affected the ratio negatively (McDonalds, n.d.).

ReferenceMcDonalds. ( n.d.). 2010 Annual report. Retrieved from: http://www.aboutmcdonalds.com/content/dam/AboutMcDonalds/Investors/C-%5Cfakepath%5Cinvestors-2010-annual-report.pdf.