Question

Anheuser-Busch InBev SA/NV (BUD) reported the following operating information for a recent year (in millions):

Sales $45,517
Cost of goods sold $17,803
Selling, general, and administrative expenses 14,439 (32,242)
Operating income $13,275*
*Before special items
In addition, assume that Anheuser-Busch InBev sold 500 million barrels of beer during the year. Assume that variable costs were 75% of the cost of goods sold and 50% of selling, general, and administrative 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.

a. Compute the break-even number of barrels for the current year. In computing variable and fixed costs and per-barrel amounts, round to two decimal places. Round the break-even number of barrels to one decimal place.
million barrels

b. Compute the anticipated break-even number of barrels for the following year. Round to one decimal place in millions of barrels.
million barrels

Answer 1

(a) 233.9 million barrels

(b) 241.9 million barrels

Step-by-step explanation:

Given that,

Sales = $45,517

Cost of goods sold = $17,803

Selling, general, and administrative expenses = 14,439

Operating income = $13,275

(a) Fixed cost:

= 25% of the cost of goods sold and 50% of selling, general, and administrative expenses

= (0.25 × $17,803 ) + (0.5 × 14,439)

= $4,450.75 + $7,219.5

= $11,670.25

Variable cost per unit:

= (75% of the cost of goods sold + 50% of selling, general, and administrative expenses) ÷ No. of barrels of beer sold

= [(0.75 × $17,803 ) + (0.5 × 14,439)] ÷ 500

= $41.14

Selling price:

= Sales ÷ No. of beer sold

= $45,517 ÷ 500

= $91.034

Break even point:

= Fixed cost ÷ Contribution per unit

= $11,670.25 ÷ ($91.034 - $41.14)

= 233.9 million barrels

(b) Increases fixed costs by $400 million.

BEP(In million barrels):

= Fixed cost ÷ contribution per unit

= $12,070.25 ÷ $49.894

= 241.9 million barrels