Compute break even assuming direct materials cost, Cost Accounting

Assignment Help:

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	0
Units produced	10,000
Units sold	8,000

Selling price per unit	$300
Variable costs per unit
Direct material	120
Direct labor	60
Variable overhead	40
Variable selling and administrative	10

Fixed costs
Fixed manufacturing overhead	250,000
Fixed selling and administrative	100,000

Herrestad Company
Absorption Income Statement
For the period ending Dec. 31, 2011

Sales	$2,400,000
Cost of goods sold	1,960,000
Gross profit (margin)	$440,000
Selling and administrative expenses	180,000
Net income	$260,000

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.

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