Question

Anheuser-Busch InBev Companies, Inc., reported the following operating information for a recent year: Sales $5,088,000 Cost of goods sold $1,272,000 Selling, general and administration 636,000 $1,908,000Income from operations $3,180,000* *Before special items In addition, assume that Anheuser-Busch InBev sold 53,000 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 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 $19,100.When computing the cost per unit amounts for the break-even formula, round to two decimal places. If required, round your final answer to the nearest whole barrel.Required:a. Compute the break-even number of barrels for the current year.b. Compute the anticipated break-even number of barrels for the following year.

Answer 1

Answer:

a. Compute the break-even number of barrels for the current year.

• 9,558 barrels

b. Compute the anticipated break-even number of barrels for the following year.

• 9,819 barrels

Explanation:

total sales = $5,088,000

units sold = 53,000 barrels

price per barrel = $96 per barrel

total variable costs = 70% of COGS + 50% of S&A costs = (70% x $1,272,000) + (50% x $636,000) = $890,400 + $318,000 = $1,208,400

variable cost per unit = $1,208,400 / 53,000 barrels = $22.80

total fix costs = total costs - variable costs = $1,908,000 - $1,208,400 = $699,600

contribution margin = sales price - variable cost per unit = $96 - $22.80 = $73.20

current break even point in units = total fixed costs / contribution margin = $699,600 / $73.20 = 9,557.38 ≈ 9,558 units

next year's fixed costs = $699,600 + $19,100 = $718,700

next year's break even point = $718,700 / $73.20 = 9,818.31 ≈ 9,819 units