Sport Caps Co. manufactures and sells caps for different sporting events. The fixed costs of operating the company are $150,000 per month, and the variable costs for caps are $4 per unit. The caps are sold for $ 8 per unit. The fixed costs provide a production capacity of up to 100,000 caps per month.

Required:

Use the formula in the chapter 4 Break even and Contribution Margin Analysis to compute the following:

a. Contribution margin per cap

b. Contribution margin ratio

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

d. Break-even point in terms of sales dollars.

e. Number of caps to be produced and sold to provide $45,000 of after-tax income, assuming an income tax rate of 25%. f. Dollars of sales needed to provide $45,000 of after-tax income, assuming an income tax rate of 25%.