Break-Even Sales BeerBev, Inc., reported the following operating information for
ID: 2460738 • Letter: B
Question
Break-Even Sales
BeerBev, Inc., reported the following operating information for a recent year:
Income from operations.
In addition, assume that BeerBev sold 43,000 barrels of beer during the year. Assume that variable costs were 75% of the cost of goods sold and 50% of selling, general and administration expenses. Assume that the remaining costs are fixed. For the following year, assume that BeerBev expects pricing, variable costs per barrel, and fixed costs to remain constant, except that new distribution and general office facilities are expected to increase fixed costs by $18,100.
a. Compute the break-even sales (barrels) for the current year. Round to the nearest whole barrel.
b. Compute the anticipated break-even sales (barrels) for the following year. Round to the nearest whole barrel.
barrels
$ 2,408,000
Sales $4,128,000 Cost of goods sold $1,032,000 Selling, general and administration 688,000 $1,720,000Income from operations.
In addition, assume that BeerBev sold 43,000 barrels of beer during the year. Assume that variable costs were 75% of the cost of goods sold and 50% of selling, general and administration expenses. Assume that the remaining costs are fixed. For the following year, assume that BeerBev expects pricing, variable costs per barrel, and fixed costs to remain constant, except that new distribution and general office facilities are expected to increase fixed costs by $18,100.
a. Compute the break-even sales (barrels) for the current year. Round to the nearest whole barrel.
b. Compute the anticipated break-even sales (barrels) for the following year. Round to the nearest whole barrel.
barrels
$ 2,408,000
Explanation / Answer
Particulars
Total
Variable
Fixed
Cost Of Goods Sold (75% Variable)
1,032,000
774,000
258,000
Selling ,general and administration(50% )
688,000
344,000
344,000
Total
1,720,000
1,118,000
602,000
No of Units
43,000
Variable cost per unit
26
Sales price = Sales in $/ No of units sold=4,128,000/43,000=$96
Contribution Per unit= Selling price per unit – Variable cost per unit
=$96-$26
=$70
Break even point in ( barrels)= Fixed cost/ Contribution per unit=$602,000/70=8,600 barrels
Particulars
Total
Variable
Fixed
Cost Of Goods Sold (75% Variable)
1,032,000
774,000
258,000
Selling ,general and administration(50% )
688,000
344,000
344,000
Addional distribution and general offiec fecilties
18,100
Total
1,720,000
1,118,000
620,100
No of Units
43,000
Variable cost per unit
26
New Break even point in ( barrels)= NewFixed cost/ Contribution per unit=$620,100/70=8,859 barrels
Particulars
Total
Variable
Fixed
Cost Of Goods Sold (75% Variable)
1,032,000
774,000
258,000
Selling ,general and administration(50% )
688,000
344,000
344,000
Total
1,720,000
1,118,000
602,000
No of Units
43,000
Variable cost per unit
26
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