Break-Even Sales BeerBev, Inc., reported the following operating information for

Question

Break-Even Sales BeerBev, Inc., reported the following operating information for a recent year: Net sales $8,976,000 Cost of goods sold $2,244,000 Selling, general and administration 714,000 $2,958,000 Income from operations $ 6,018,000 In addition, assume that BeerBev sold 51,000 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 $27,500. a. Compute the break-even sales (barrels) for the current year. Round to the nearest whole barrel. 6750 barrels b. Compute the anticipated break-even sales (barrels) for the following year. Round to the nearest whole barrel. 136 barrels

Explanation / Answer

Part 1 Break even point (barrels) for current year

Step - 1 Formula of break even points (barrels)

Step - 2 Calculation of Fixed cost

Fixed Cost in cost of goods sold ($2244000 * 25%)

Step 3 - Calculation of contribution per barrel

Step 4 Break even point (Barrel) for current year

Part 2 - Anticipated Break even point

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