Joe Billy Ray Bob’s Country and Western Company sells a single product—cowboy hats— for $20 per hat. The total fixed cost is $180,000 per year, and the variable cost per hat is $15.

Required: (1) Compute the following amounts for Joe Billy Ray Bob’s Country and Western Company:

(a) Contribution margin per hat

(b) Break-even point in hats

(c) The numbers of hats that must be sold to earn $15,000 of profit (2) Repeat all computations in (1), assuming Joe Billy Ray Bob’s decides to in- crease its selling price per hat to $25. Assume that the total fixed cost and the variable cost per hat remain the same.

(3) Do you agree with Joe Billy Ray Bob’s decision to increase its selling price per hat? What other factors should the managers consider in making this decision?