Answer:
1. 6,833 barrels.
2. 7,039 barrels.
Explanation:
Requirement 1
We know,
Break-even number of barrels = Fixed cost ÷ Contribution Margin per unit
Given,
Contribution Margin per unit = Sales price per unit - Variable expense per unit
or, Contribution Margin per unit = (Total sales ÷ Sales volume) - [(75% of the cost of goods sold + 50% of selling, general, and administrative expenses) ÷ 41,000]
or, Contribution Margin per unit = ($5,248,000 ÷ 41,000) - [($1,312,000 × 75%) + (656,000 × 50%) ÷ 41,000]
or, Contribution Margin per unit = $128 - [($984,000 + 328,000) ÷ 41,000]
or, Contribution Margin per unit = $128 - ($1,312,000 ÷ 41,000)
or, Contribution Margin per unit = $128 - $32 = $96
And, Fixed cost = Total cost - Variable expense = (Cost of goods sold + Selling, general, and administrative expenses) - Variable expense
Fixed cost = ($1,312,000 + 656,000) - $1,312,000 = $656,000
Therefore,
Break-even number of barrels = $656,000 ÷ $96 = 6,833 barrels.
Requirement 2
Again,
Break-even number of barrels = Fixed cost ÷ Contribution Margin per unit
Given,
As Anheuser-Busch InBev expects to increase the fixed expenses by $19,700, the new fixed cost = $656,000 (<em>from requirement 1</em>) + $19,700
Fixed cost = $675,700
Given,
Contribution Margin per unit = $96 (<em>From requirement 1</em>)
Therefore,
Break-even number of barrels for the following year = $675,700 ÷ $96
Break-even number of barrels = 7,039 (rounded to nearest number).
