Benchmarking Logistics Performance

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Variable and Fixed Costs

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

Product Information 
  
Beginning inventory0
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 needs to include answers to all the questions listed above. Show computations, discuss the results, and include references in APA format. And References

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