Anheiser-Busch InBev Companies, Inc. reported the following operating informatio
ID: 2448702 • Letter: A
Question
Anheiser-Busch InBev Companies, Inc. reported the following operating information for a recent year (in millions). Sales 39,758 Cost of Goods Sold 16447 Selling, general and administration 10578 27025 (16447+10578) Income from Operations 12733* *Before special items In addition, assume Anheuser InBev soled 320 million barrels of beer during the year. Assume that the variable costs were 70% of the cost of goods sold and 40% of selling, general, and admission expenses. Assume the remaining costs are fixed. For the following year, assume Anheuser-Busch InBev expects pricing, variable costs per barrel and fixed costs to remain a 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. NOTE: For the selling price per barrel and variable cost per barrel, round to the nearest cent. Also, round the break-even to the nearest barrel b. Compute the anticipated break-even number of barrels for the following year.
Explanation / Answer
Answer:
a. Computation of Break-Even Number of Barrels for the Current Year (when 320 Million Barrels sold)
Break-Even Point (In number) = Fixed Cost / Contribution per Unit
Fixed Cost (note 2) = 11,280.90
Contribution Per Unit (Note 1) = 75.04
Break-Even Point (In number) = 11,280.90 / 75.04 = 150.33 Barrels or 150 Barrels
b. Computation of Anticipated Break-Even Number of Barrels for the following year
Expected Fixed Cost (selling, general, and admission expenses) = 6,346.80 + 400 = 6,746.80
Fixed Cost related to COGS (Constant) = 4,934.10
Anticipated Total Fixed Cost = 6,746.80 + 4,934.10 = 11,680.90
Anticipated Break-Even Point (In number) = New Fixed Cost / Contribution per Unit = 11,680.90 / 75.04 = 155.66 Barrels or 156 Barrels
Note1: Calculation of Variable Cost when 320 barrel were sold during the year
Particulars
Calculation
Amount
70% of Cost of Goods Sold
70% x 16,447
11,512.90
40% of Selling, General and administration expenses
40% x 10,578
4,231.20
Total Variable Cost
15,744.10
Variable Cost Per Unit
15,744.10 / 320
49.20 per barrel
Contribution per Unit = (Sales – Variable Cost)/Total Barrels = (39,758 – 15,744.10) /320 = 75.04
Note 2: Calculation of Fixed and Variable Cost
A. Cost of Goods Sold
70% of Cost of Goods Sold is variable, then balance 30% is fixed cost.
Cost of Goods Sold = 70% Variable + 30% Fixed
16,447 = 11,512.90 + Fixed Cost
Fixed Cost related to COGS = 4,934.10
B. Selling, General and administration expenses
Selling, General and administration expenses = 40% Variable + 60% Fixed
10,578 = 4,231.20 + Fixed Cost = 6,346.80
Total Fixed Cost = 4,934.10 + 6,346.80 = 11,280.90
Note 3:
Anheiser-Busch InBev Companies, Inc.
Income Statement
Particulars
Amount in Millions (US$)
(320 million barrels Sold)
A.
Sales
39,758.00
B
Less: Variable Cost (Note 1)
(15,744.10)
C.
Contribution (A-B)
24,013.90
D.
Fixed Cost (Note 2)
(11,280.90)
E.
Income from Operation (C-D)
12,733.00
Particulars
Calculation
Amount
70% of Cost of Goods Sold
70% x 16,447
11,512.90
40% of Selling, General and administration expenses
40% x 10,578
4,231.20
Total Variable Cost
15,744.10
Variable Cost Per Unit
15,744.10 / 320
49.20 per barrel