Compute break even assuming direct materials cost, Cost Accounting

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

Product information


Beginning inventory


Units produced


Units sold




Selling price per unit


Variable costs per unit


  Direct material


  Direct labor


  Variable overhead


  Variable selling and administrative




Fixed costs


  Fixed manufacturing overhead


  Fixed selling and administrative




Herrestad Company

Absorption Income Statement

For the period ending Dec. 31, 2011





Cost of goods sold


  Gross profit (margin)


Selling and administrative expenses


  Net income



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.

Posted Date: 3/23/2013 1:44:00 AM | Location : United States

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