Question $(2)$

Sport Caps Co$.$ manufactures and sells caps for different sporting events. The fixed costs of operating the company are $$150,000$ per month, and variable costs are $$5$ per cap. The caps are sold for $$8$ per unit. The production capacity is $100,000$ caps per month.

Required

Use the formulas in the chapter to compute the following:

a$.$ Contribution margin per cap.

b$.$ Break$-$even point in terms of the number of caps produced and sold.

c$.$ Amount of income at $30,000$ caps sold per month $($ignore taxes$).$

d$.$ Amount of income at $85,000$ caps sold per month $($ignore taxes$).$

e$.$ Number of caps to be produced and sold to provide $$60,000$ of income $($pretax$).$

Draw a CVP chart for the company, showing cap output on the horizontal axis. Identify $($a$)$ the breakeven point and $($b$)$ the amount of pretax income when the level of cap production is $70,000.$

Use the formulas in the chapter to compute the

a$.$ Contribution margin ratio.

b$.$ Break$-$even point in terms of sales dollars.

c$.$ Amount of income at $$250,000$ of sales per month $($ignore taxes$).$

d$.$ Amount of income at $$600,000$ of sales per month $($ignore taxes$).$

e$.$ Dollars of sales needed to provide $$60,000$ of pretax income.