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Research Application

McDonald’s corporation is a chain of fast food restaurants operating in many countries worldwide. Its headquarters are located in the United States with several other branches in over 115 countries. The business deals with consumer food service that includes pizzas, dinner house, and salads among others. McDonald’s just like any other business has operational expenses that are incurred in meeting the daily needs of the company. The expenses can be categorized as cost of sales, selling costs, general, and administrative among other operational expenses (Gregory, 2009).

Cost of sales includes the expenses that the company incurs in the creation of goods or the provision of services. McDonald’s cost of sales arise from the purchase of raw materials, labour, and the other running expenses. Being a service company, McDonald’s incurs expenses in the training of its employees to enable the provision of excellent customer service that exceeds customer expectations. The selling expenses are incurred during the creation of sales for the business (Gregory, 2009).

They include marketing expenses as well as the compensation that may arise from sales staff compensation. General and administrative expenses arise from overhead costs incurred in the business operations. For instance, the human resource function creates administrative costs in different areas such as hiring and recruitment.

Other operational expenses include the depreciation and amortization that accrue from the purchase of assets such as equipments. Amortization expenses are experienced when an intangible asset such as the building of a brand name. therefore, there exists several areas in a business that lead to the different expenses a company may incur in its daily operations to facilitate the achievement of its objectives and goals (Hwang, 2010)

A review of McDonald’s financial data reveals an impressive growth of the business since the company has experienced revenue growth from $24.1B to $27.0B within a period of 4 years from 2008 to 2011. A close analysis of the financial data during these years also evidences reduced percentage of the company’s selling, general, and administrative expenses among others (Bloomberg business week). This is an indication of reduced overall operational costs and an increase in revenues in the sale of McDonald products.