Project #50984 - Accounting

VARIABLE AND FIXED COSTS

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

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, 2011

   

Sales

$2,000,000

Cost 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.

Subject General
Due By (Pacific Time) 12/14/2014 12:00 am
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