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

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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.

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