Question
1. BeerBev, Inc., reported the following operating information for a recent year: Net sales $5,120,000 Cost of goods sold $1,280,000 Selling, general and administration 384,000
1.
BeerBev, Inc., reported the following operating information for a recent year:
Net sales | $5,120,000 |
Cost of goods sold | $1,280,000 |
Selling, general and administration | 384,000 |
$1,664,000 | |
Income from operations | $ 3,456,000* |
*Before special items
In addition, assume that BeerBev sold 32,000 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 $15,400.
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. ________ barrels
b. Compute the anticipated break-even number of barrels for the following year. ________ barrels
2.
Rotelco is one of the largest digital wireless service providers in the United States. In a recent year, it had approximately 100 direct subscribers (accounts) that generated revenue of $54,300. Costs and expenses for the year were as follows:
Cost of revenue | $23,300 |
Selling, general, and administrative expenses | 17,900 |
Depreciation | 6,000 |
Assume that 65% of the cost of revenue and 20% of the selling, general, and administrative expenses are variable to the number of direct subscribers (accounts). In part (a) and (b), round all interim calculations and final answers to one decimal place.
a. What is Rotelco's break-even number of accounts, using the data and assumptions above? Round to the nearest whole number. ________ accounts
b. How much revenue per account would be sufficient for Rotelco to break even if the number of accounts remained constant? Round to the nearest dollar. $ __________ per account
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