Question

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

Sales		$5,472,000
Cost of goods sold	$1,368,000
Selling, general, and administrative expenses	798,000	2,166,000
Operating income		$3,306,000*
*Before special items

In addition, assume that Anheuser-Busch InBev sold 57,000 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 $22,200.

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

Break even point=Total fixed cost/Contribution per unit

Sales=$5,472,000

Variable cost=75% of cost of goods sold+50% of selling and aministrative expense

=$1,368,000*75%+$798,000*50%

=$1,026,000+$399,000

Variable cost=$1,425,000

Fixed cost=25% of cost of goods sold+50% of selling and administrative expense

=1,368,000*25%+$798,000*50%

=$342,000+$399,000

Fixed cost=$741,000

Contribution=Sales-Variable cost

=$5,472,000-$1,425,000

Contribution=$4,047,000

Contribution per unit=4,047,000/57,000

Contribution per unit=71

Breakeven point in units=$741,000/71

Break even number of barrels=10,437 units

2

Fixed cost=741,000+22,200

Fixed cost=$763,200

Contribution per unit=$71

Break even number of barrels=$763,200/71

Break even units=10,749 units