Anheuser-Busch InBev Companies, Inc., reported the following operating informati

Question

Anheuser-Busch InBev Companies, Inc., reported the following operating information for a recent year (in millions of dollars): In addition, assume that Anheuser-Busch InBev sold 320 million barrels of beer during the year. Assume that variable costs were 70% of the cost of goods sold and 40% 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 $400 million. 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. Compute the break-even number of barrels for the current year. Compute the anticipated break-even number of barrels for the following year.

Explanation / Answer

Let us get to the computation methodology of Break-even units:

Fixed Cost divided by Contribution per unit.

Whereas, contribution per unit implies sales price minus variable cost per unit.

sales price per unit - 39758/320= $ 124.2438

variable cost per unit -

((16447 * 70%)+(10978*40%))/320=$49.20

contribution per unit = 124.24 - 49.20 = $75.04

And selling and general overheads here needs to be increased by 400 million dollars, keeping the variable & fixed ratios same.

the answer would be:

fixed cost = (16447*30%)+((10578+400)*60%)= $11520.90

break-even units would be :

11520.90 divided by 75.04 (contribution per unit)

153,523,085 barrels

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