Webb company sells flags with team logos. Webb has fixed costs of \($639,600\) per year plus variable costs of \($4.20\) per flag. Each flag sells for $12.00.

Requirements 

1. Use the income statement equation approach to compute the number of flags Webb must sell each year to break even.

2. Use the contribution margin ratio CVP formula to compute the dollar sales. W'ebb needs to earn \($32,500\) in operating income for 2011.

3. Prepare Webb’s contribution margin income statement for the year ended December 31, 2011, for sales of 76,000 flags. Cost of goods sold is 65% of variable costs. Operating costs make up the rest of variable costs and all of fixed costs.

4. The company is considering an expansion that will increase fixed costs by 20% and variable costs by \($0.30\) per flag. Compute the new breakeven point in units and in dollars. Should W'ebb undertake the expansion? Give your reasoning.