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.
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Sales (in millions)
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Variable Costs (in millions)
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Consumer products
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$1,031.8
|
$ 610
|
|
Pet products
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837.3
|
350
|
|
Soup and infant-feeding products
|
302.0
|
100
|
|
|
$2,171.1
|
$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.