Break-Even Sales Anheuser-Busch InBev Companies, Inc., reported the following op
ID: 353794 • Letter: B
Question
Break-Even Sales Anheuser-Busch InBev Companies, Inc., reported the following operating information for a recent year (in millions of dollars) Net sales Cost of goods sold $39,758 $16,447 10,578 $27,025 Seliling, general and administration Income from operations $12,733 Before special items 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 or goods sold and 40%6 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. a. Compute the break-even number of barrels for the current year X barrels b. Compute the anticipated break-even number of barrels for the following year X barrelsExplanation / Answer
Variable costs = 16447*0.7 + 10578*0.4 = $ 15744.1 m
Fixed costs = 16447*(1-0.7) + 10578*(1-0.4) = $ 11280.9 m
Additional fixed cost = $ 400 m
Total Fixed cost = 11280.9+400 = $ 11680.9 m
Selling price per barrel = 39758/320 = 124.24
Variable cost per barrel = 15744.1/320 = 49.20
a) Break-even number of barrels for the current year = Fixed cost / (Selling price per barrel - Variable cost per barrel)
= 11280.9*10^6/(124.24-49.20)
= 150,324,937 barrels
b) Break-even number of barrels for the following year = Total Fixed cost / (Selling price per barrel - Variable cost per barrel)
= 11680.9*10^6/(124.24-49.20)
= 155,655,183 barrels