Monster Beverage Corporation is a leading energy-drink manufacturer based in the US. The company has been successful in the last few years to generate high demand for its products not only in its main US market but also internationally. The product selected of Monster Beverages Corporation is Monster Energy®. It is one of the most popular products of the company, and it can be expected that the company sell the most number of cases of this product in the last year. It is an important to estimate the total number of cases of this product that the company sells in a year to determine the operating income from the sales of this product. From the company’s Form 10 K report, it can be indicated that the company sold 274,621 cases of 192 ounces pack of different products. The company currently has six different brands. Based on the assumption that Monster Energy has the highest sales among these brands. Therefore, it can be assumed that the proportion of this product is 40% of the total sales. It implies that the company sold 110,648 cases of Monster Energy in 2015. The total number of cases sold by the company is used for calculating total sales revenue of Monster Energy. Each case has 192 ounce of energy drink. Therefore, it can be estimated that 110,648 cases of Monster Energy have 21,244,416 ounces of energy drink.
The cost of sales of the company in 2015 was $1,090,263,000 that was 40% of the sales revenue .. It implied that the company operated at a gross profit margin of 60%. It is used for ascertaining the cost of production of Monster Energy. The current price of Monster Energy obtained from Wal-Mart website is $7.94 for a pack of 4 times 16oz cans. The price is used for calculating the price per ounce as follows.
Price per ounce: $7.94/(4 x 16) = $0.124
The cost of producing per ounce is estimated as follows.
Cost per ounce: $0.124 x 40% = $0.05
The cost per ounce is further divided in the following cost items. The activitity based costing is used for allocating different cost items to the production of Monster Energy. The estimates of each cost item are based on assumptions because actual information related to the company is not available from the company’s website or other corporate documents.
The company’s selling and administrative expenses in 2015 were $900,118 that was 33.1% of the sales revenue. The same ratio is used to allocate the proportion of selling and administrative expenses to Monster Energy sales. The price per ounce is $0.124 and therefore the selling and administrative expense per ounce is $0.041. Based on these estimations the operating income of the company related to the sales of Monster Energy is provided in the following income statement.
References
Monster Beverage Corporation: SEC Form 10-K . (2016, February 29). Retrieved from http://investors.monsterbevcorp.com/sec.cfm?DocType=Annual&Year=&FormatFilter=#
Monster Energy Drink, 16 fl oz, 4 count . (2016). Retrieved from http://www.walmart.com/ip/Monster-Energy-Drink-16-fl-oz-4-count/10534634
274,621
