Question

In an outline capital letters designate

Answer 1

In an outline capital letters can indicate many different things, but almost always they are used to signal a change in topic, or at lease a change in subtopic. 

Answer 2

In an outline capital letters designate subtopics.

An outline begins with a thesis statement. The major points are listed with Roman numerals (I, II, III). The first subdivision of these major points are capital letters (A, B, C), followed by Arabic numerals (1, 2, 3), then lower-case letters (a, b, c). Therefore, the capital letters represent subtopics in an outline.