Net sales $36,297
Cost of goods sold $16,151
Selling, general and administration 9,249
$25,400
Income from operations $10,897*
*Before special items
In addition, assume that Anheuser-Busch InBev sold 300 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 $350 million.
a. Compute the break-even number of barrels for the current year. Note: For the selling price per barrel and variable costs 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.
Answer:
Total Cost Variable Cost Variable Cost
(in millions) Percentage (in millions)
Cost of goods sold……………………… $16,151.0 × 70% = $11,305.7
Selling, general and administrative… 9,249.0 × 40% = 3,699.6
Total Cost Variable Cost Fixed Cost
(in millions) (in millions) (in millions)
Cost of goods sold……………………… $16,151.0 – $11,305.7 = $ 4,845.3
Selling, general and administrative… 9,249.0 – 3,699.6 = 5,549.4
Total fixed cost……………………… $10,394.7
Number of
Total Amount Barrels
(in millions) (in millions) Per Unit Amount
Net sales…………………………………… $36,297.0 ÷ 300 = $120.99
Variable cost of goods sold…………… 11,305.7 ÷ 300 = 37.69
Variable selling, 3,699.6 ÷ 300 = 12.33
general and administrative…………
a. Break-Even Sales (units) =
Break-Even Sales (units) =
Fixed Costs
Unit Contribution Margin
$10,394,700,000 1
$120.992 – $37.69 3 – $12.33 4
= 146,466,112 barrels
The variable costs per unit are determined by multiplying the total amount of each cost by the
variable cost percentage (70% for cost of goods sold and 40% for selling, general and
administrative costs), then dividing by the number of barrels.
1 ($16,151,000,000 × 30%) + ($9,249,000,000) × 60%
2 $36,297,000,000 ÷ 300,000,000
3 ($16,151,000,000 × 70%) ÷ 300,000,000
4 ($9,249,000,000 × 40%) ÷ 300,000,000