Break-Even Sales Anheuser-Busch InBev Companies, Inc., reported the following op

Question

Break-Even Sales

Anheuser-Busch InBev Companies, Inc., reported the following operating information for a recent year:

In addition, assume that Anheuser-Busch InBev sold 34,000 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 Anheuser-Busch InBev 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 $17,300.

a. Compute the break-even number of barrels for the current year. Round to the nearest whole barrel.
barrels

b. Compute the anticipated break-even number of barrels for the following year. Round to the nearest whole barrel.
barrels

Sales $4,896,000 Cost of goods sold $1,224,000 Selling, general and administration 544,000 $1,768,000 Income from operations $ 3,128,000* *Before special items

Explanation / Answer

per unit Sales $4,896,000 34000 Less: Variable cost Cost of goods sold (1224000*75%) $918,000 Selling, general and administration (544000*50%) 272,000 Contribution Margin 3,706,000 109 Fixed cost Cost of goods sold (1224000*25%) $306,000 Selling, general and administration (544000*50%) 272,000 Total fixed cost 578,000 Income from operations 3,128,000 ans a Break even Fixed cost/CM per unit 5303 barrel 578000/109 ans b Break even Fixed cost/CM per unit 5461 barrel (578000+17300)/109 If any doubt please comment

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