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

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

Sales $45,517
Cost of goods sold $17,803
Selling, general, and administrative expenses 14,439 (32,242)
Operating income $13,275*
*Before special items

In addition, assume that Anheuser-Busch InBev sold 500 million 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 $400 million.

a. Compute the break-even number of barrels for the current year. In computing variable and fixed costs and per-barrel amounts, round to two decimal places. Round the break-even number of barrels to one decimal place.
million barrels

b. Compute the anticipated break-even number of barrels for the following year. Round to one decimal place in millions of barrels.
million barrels

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Answer #1

Answer (a):

Current Year:

Total variable cost = 75% * $17,803 + 50% * 14,439 = $20571.75 million

Total fixed cost = (17803 +14439) - 20571.75 =$11,670.25 million

Contribution margin = sales - Total variable cost = 45517 - 20571.75 = 24945.75 million

Contribution margin per barrel = 24945.25 / 500 = $49.8905

Break-even number of barrels for the current year = Fixed cost / Contribution margin per barrel

= $11,670.25 / 49.8905

= 233.9 million barrels

Break-even number of barrels for the current year = 233.9 million barrels

Answer (b):

Following Year:

Fixed cost increases by = $400 million

Total fixed cost = $11,670.25 + 400 =$12070.25 million

Break-even number of barrels for the following year = Fixed cost / Contribution margin per barrel

= $12,070.25 / 49.8905

= 241.9 million barrels

Break-even number of barrels for the following year = 241,9 million barrels

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