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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

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BuyFindarrow_forward

Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

Break-even sales

Molson-Coors Brewing Company (TAP) reported the following operating information for a recent year (in millions):


Assume that Molson-Coors sold 120 million barrels of beer during the year, variable costs were 70% of the cost of goods sold and 40% of marketing, general, and administrative expenses, and that the remaining costs are fixed. For the following year, assume that Molson-Coors 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 $100 million.
Rounding to the nearest cent:
a.Compute the break-even sales (barrels) for the current year.
b.Compute the anticipated break-even sales (barrels) for the following year.

To determine

Concept Introduction:

Breakeven point: At this Point Company does not make any loss or profit because at this point sales are equal to an amount on which profit is equal to the zero.

To Identify:

Identify Break even sales for the current year and the next year.

Explanation

Break even of current year= Fixed cost/ contribution per unit

= (2164*.30+ 1052*.40)/ (3568-[(2164*.70+1052*.60)/120])

= 1070 million/ 11.85

= 90...

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