Module 3 ACC202

Module 3 - SLP

Variable and Fixed Costs

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.