John Williams Company sells a single product - bush hats - for \(\$ 24\) per hat. The total fixed cost is \(\$ 180000\) per year, and the variable cost per hat is \(\$ 15\).

Required:

a Compute the following amounts for John Williams Company:

i contribution margin per hat ii break-even point in hats iii the numbers of hats that must be sold to earn \(\$ 27000\) profit.

b Repeat all calculations in (a) assuming John Williams' decides to increase its selling price per hat to \(\$ 25\). Assume that the total fixed cost and the variable cost per hat remain the same.

c Do you agree with John Williams' decision to increase its selling price per hat? What other factors should the managers consider in making this decision?