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

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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