Break-Even Sales Anheuser-Busch InBev Companies, Inc., reported the following op
ID: 2518103 • Letter: B
Question
Break-Even Sales
Anheuser-Busch InBev Companies, Inc., reported the following operating information for a recent year:
Sales $5,376,000
Cost of goods sold $1,344,000
Selling, general and administration 504,000
$1,848,000
Income from operations $ 3,528,000*
*Before special items
In addition, assume that Anheuser-Busch InBev sold 42,000 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 $17,600.
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
Explanation / Answer
Break even number of barrels = fixed costs/Contribution margin per unit
Requirement a
Contribution margin per unit:
Sales $ 5,376,000
Less: Variable costs:
cost of goods sold = 1076,000
(1344,000*75%)
Selling, general and administration = 252,000
Expenses (504,000*50%)
Contribution margin $4,116,000
Number of barrels sold 42,000 barrels
Contribution per barrel $4,116,000/42,000 =$98 per barrel
Fixed costs:
Cost of goods sold 336,000
(1,344,000 *25%)
Selling, general and
administration expenses 252,000
(504,000*50%)
Total fixed costs 588,000
Break even number of barrels $588,000/$98 = 6,000 barrels
Requirement b
Anticipated fixed costs 588,000 + 17,600 = 605,600
Anticipated break even number of barrels
=605,600/98 = 6,180 barrels
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