Exercise 16.8 Contribution Margin, Break-Even Units, Contribution Margin Income Statement, Margin of Safety

Zebra Company manufactures custom-designed skins (covers) for iPods and other portable MP3 devices. Variable costs are $10.80 per custom skin, the price is $16, and fixed costs are $66,560.

Required:

1. What is the contribution margin for one custom skin? Round your answer to the nearest cent. $ _____________ per custom skin

2. How many custom skins must Zebra Company sell to break even? ____________ custom skins

3. If Zebra Company sells 13,000 custom skins, what is the operating income? $__________

4. Calculate the margin of safety in units and in sales revenue if 13,000 custom skins are sold.

Margin of safety in units	__________	units
Margin of safety in sales revenue	$_________