Break-Even sales BeerBev, Inc, reported the following operating Information for

Question

Break-Even sales BeerBev, Inc, reported the following operating Information for a recent year: In addition, assume that, BeerBev sold 58,000 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 find. 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 collice facilities are expected to Increase fixed cost by $27,800. a. compute the break-even sales (barrels) for the current year, Round to the nearest whole barrel. barrels b. Compote the anticipated break even salrs (barrels) lor the fotowtng year Round to the nearest whole barrel barrels

Explanation / Answer

a) variable cost = 75% of cost of goods sold + 50% of selling ,general and administration

=(75% * $1856000) + (50% * $928000 )

= 1392000+464000

= $1856000

Fixed cost = ($2784000 - $1856000)

= $928000

Break even sale in units = fixed cost / (sales price per unit - variable cost per unit)

= $928000 / ([$7424000/ 58000 unit ] - [$1856000/ 58000 units])

= $928000 / ($128 -$32)

= $928000/$96

=9667 barrels

b)   Anticipated break even sale in units = ($928000 + $27800) / ([$7424000/ 58000 unit ] - [$1856000/ 58000 units])

= $955800 / ($128 -$32)

= $955800 / $96

=9956 barrels

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