Question
In: Accounting
Break-Even Sales BeerBev, Inc., reported the following operating information for a recent year: Net sales $11,712,000...
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Break-Even Sales
BeerBev, Inc., reported the following operating information for a recent year:
Net sales $11,712,000 Cost of goods sold $2,928,000 Selling, general and administration 610,000 $3,538,000 Income from operations $ 8,174,000* *Before special items
In addition, assume that BeerBev sold 61,000 barrels of beer during the year. Assume that variable costs were 75% of the cost of goods sold and 50% of selling, general and administration expenses. Assume that the remaining costs are fixed. For the following year, assume that BeerBev 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 $31,100.
When computing the cost per unit amounts for the break-even formula, round to two decimal places. If required, round your final answer to one decimal place.
a. Compute the break-even number of barrels for the current year.
barrelsb. Compute the anticipated break-even number of barrels for the following year.
barrels
Solutions
Expert Solution
| a)Computation of Break Even number of barrels for the current year |
|
Variable Cost = 75% of Cost of Goods Sold + 50%
of Selling and adminstrative Expenses = (75 % x $2,928,000) + (50% x $610,000) = $2,196,000 + $305,000 Variable Cost (VC) = $2,501,000 |
|
Fixed cost(FC) = Total Cost (-) variable Cost = $3,538,000 (-) $2,501,000 = $1,037,000 |
|
Variable cost per barrel = Variable Cost / No. of units of
Sales = $2,501,000 / 61,000 = $41 |
|
Sale Price per barrel = net Sales / No. of units of Sales = $11,712,000 / 61,000 = $192 |
|
Contribution per barrel = Sale Price (-) Variable Cost = $192 (-) $41 = $151 |
|
Break Even sales = Fixed
Cost / Contribution per Barrel = $1,037,000 / $151 = 6,867.55 or 6,868 Barrels |
| B)Computation of the anticipated break-even number of barrels for the next year. |
|
New fixed cost = Fixed Cost (+) Increase in
Fixed Cost = $1,037,000 + $31,100 = $1,068,100 |
|
Break Even sales = New Fixed
Cost / Contribution per Barrel = $1,068,100 / $151 = 7,073.51or 7,074 Barrels |
ekkarill92 answered 4 months agoRelated Solutions
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