lowv2 | Online teaching and learning resource from Cengage Learning SupportAs un
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lowv2 | Online teaching and learning resource from Cengage Learning SupportAs units 7. EX. 19-12 ALGO (Algorithmic) Break-Even Sales nheuser-Busch InBev Companies, Inc., reported the following operating information for a recent year Sales Cost of goods sold Selling, general and administration $9,072,000 $2,268,000o 1,134,000 $3,402,000 Income from operations Before special items In addition, assume that Anheuser-Busch InBev administration expenses. Assume that the remaining costs are fixed. For the following year, assume that Anheuser-Busch InBev expects pricing, variable cos $5,670,000 old 63,000 barrels of beer during the year. Assume that variable costs were 75% o, the cost of goods sold and 50% of selling, general, and remain constant, except that new distribution and general office facilities are expected to increase fixed costs by $34,000 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 O Type here to search 20 2017Explanation / Answer
Requirement a:
Variable Costs:
75% of COGS = 75% of $2268000 = $1701000
50% of selling, general and administrative expenses = 50% of $1134000 = $567000
Total Variable Costs = $ 2268000
Variable Cost per barrel = 2268000 / 63000 = $36
Fixed Costs:
COGS = 2268000 - 1701000 = $567000
Selling, general and administration = 1134000 - 567000 = $567000
Total Fixed Costs = 567000+ 567000 = $1134000
Selling Price per unit = Sales / No of barrels = $9072000 / 63000 = $144
Contribution per unit = Selling Price - Variable Cost = $144 - $36 = $108
Breakeven Number of barrels for the current year = Fixed Costs / Contribution per unit
= $1134000 / 108 = 10500 barrels
Requirement b:
Anticipated Fixed Costs = $1134000 + 34000 = $1168000
Anticipated Breakeven number of barrels = Anticipated Fixed Costs / Contribution per unit
= $1168000 / 108
= 10815 barrels
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