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Kincaid Company sells flags with team logos. Kincaid has fixed costs of $583,200 per year plus variable costs of $4.80 per flag. Each flag sells for $12.00.
1. Use the equation approach to compute the number of flags Kincaid must sell each year to break even.
2. Use the contribution margin ratio approach to compute the dollar sales Kincaid needs to earn $33,000 in operating income for 2014. (Round your contribution margin ratio to two decimal places.)
3. Prepare Kincaid’s contribution margin income statement for the year ended December 31, 2014, for sales of 72,000 flags. (Round your final answers up to the next whole number.)
4. The company is considering an expansion that will increase fixed costs by 21% and variable costs by $0.60 per flag. Compute the new breakeven point in units and in dollars. Should Kincaid undertake the expansion? Give your reasoning. (Round your final answers up to the next whole number.)
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