Question

Break-Even Sales

Anheuser-Busch InBev SA/NV (BUD) reported the following operating information for a recent year:

Sales		$8,256,000
Cost of goods sold	$2,064,000
Selling, general, and administrative expenses	430,000	2,494,000
Operating income		$5,762,000*
*Before special items

In addition, assume that Anheuser-Busch InBev 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 administrative 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 $21,900.

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

Answer 1

Selling price per barrel	192	=8256000/43000
Variable Cost of goods sold	36	=(2064000*75%)/43000
Variable Selling, general, and administrative expenses	5	=(430000*50%)/43000
Variable costs per barrel	41
Fixed costs	731000	=(2064000*25%)+(430000*50%)
a
Fixed costs	731000
Divide by Contribution margin per barrel	151	=192-41
Break-even number of barrels	4841	barrels
b
Fixed costs	752900	=731000+21900
Divide by Contribution margin per barrel	151	=192-41
Break-even number of barrels	4986	barrels

answered by: anonymous