Concept explainers
Real-World Focus
In a recent report, the Del Monte Foods Company reported three separate operating segments: consumer products (which includes a variety of canned foods including tuna, fruit, and vegetables); pet products (which includes pet food and snacks and veterinary products); and soup and infant-feeding products (which includes soup, broth, and infant feeding and pureed products).
In its annual report, Del Monte uses absorption costing. As a result, information regarding the relative composition of its fixed and variable costs is not available. We have assumed that $860.3 million of its total operating expenses of $1,920.3 million are fixed and have allocated the remaining variable costs across the three divisions. Sales data, along with assumed expense data, are provided below.
(in millions) | ||
Sales | Variable Costs | |
Consumer products | $1,031.8 | $ 610 |
Pet products | 837.3 | 350 |
Soup and infant-feeding products | 302.0 | 100 |
$2,171.1 | $1,060 |
Instructions
(a) Compute each segments contribution margin ratio and the sales mix.
(b) Using the information computed in part (a), compute the company's break-even point in dollars, and then determine the amount of sales that would be generated by each division at the breakeven point.
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Managerial Accounting: Tools for Business Decision Making
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