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	$

Break-Even in Units

Gelbart Company manufactures gas grills. Fixed costs amount to $16,335,000 per year. Variable costs per gas grill are $225, and the average price per gas grill is $600.

Required:

1. How many gas grills must Gelbart Company sell to break even? ____ gas grills

2. If Gelbart Company sells 46,775 gas grills in a year, what is the operating income? $___

3. If Gelbart Companys variable costs increase to $240 per grill while the price and fixed costs remain unchanged, what is the new break-even point? ____gas grills