Problem:
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 on the next page.
|
(in millions)
|
|
Sales
|
Variable Costs
|
|
Consumer products
|
$1,031.80
|
$610
|
|
Pet products
|
837.3
|
350
|
|
Soup and infant-feeding products
|
302
|
100
|
|
$2,171.10
|
$1,060
|
Instructions
(a) Compute each segment's 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 break-even point.