Herrestad Company

Below find production and sales information for Herrestad Company. We will use this same company for the Module 4.

Product Information

Beginning inventory 0 Units produced $10,000 Units sold $8,000

Selling price per unit $250 Variable costs per unit Direct material $100 Direct labor $50 Variable overhead $30 Variable selling and administrative $10

Fixed costs Fixed manufacturing overhead $200,000 Fixed selling and administrative $100,000

Herrestad company Absorption income statement for the period ending Dec. 31, 2015

Sales $2,000,000 Costs of goods sold $1,600,000 Gross profit (margin) $400,000 Selling and administrative expenses $180,000 Net income $220,000

Required:

Prepare a contribution margin (behavioral, variable) income statement for Herrestad Company, compare net operating profit from a contribution margin income statement with net income from an absorption income statement, and explain why this difference happens. Prepare a second version assuming the selling price per unit increases to $270 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 $100 to $130, 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.

SLP Assignment Expectations

It is important to answer the questions above. The discussion should be two to four pages and written in a clear and concise manner. Support your discussion with references in APA format. You are encouraged to use Excel or other compatible spreadsheet when computations are involved.

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