Below find production and sales information for Herrestad Company. We will use this same company for all the SLPs in this course.
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Product information
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Beginning inventory
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0
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Units produced
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10,000
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Units sold
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8,000
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Selling price per unit
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$300
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Variable costs per unit
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Direct material
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120
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Direct labor
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60
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Variable overhead
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40
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Variable selling and administrative
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10
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Fixed costs
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Fixed manufacturing overhead
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250,000
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Fixed selling and administrative
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100,000
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Herrestad Company
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Absorption Income Statement
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For the period ending Dec. 31, 2011
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Sales
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$2,400,000
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Cost of goods sold
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1,960,000
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Gross profit (margin)
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$440,000
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Selling and administrative expenses
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180,000
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Net income
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$260,000
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Required:
Prepare a contribution margin (behavioral, variable) income statement for Herrestad Company. Prepare a second version assuming the selling price per unit increases to $320 per unit.
Use the original information to:
- Determine the number of units the company must sell to break even for the year?
- Compute break even assuming direct materials cost increase from $120 to $140, but all information remains the same.
The submission should be 2 to 4 pages and need to include answers to all the questions listed above. Show computations, discuss the results and include references in APA format.