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

Cheetah Company manufactures custom-designed skins (covers) for iPods and other portable MP3 devices. Variable costs are $7.00 per custom skin, the price is $10, and fixed costs are $28,500.

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 Cheetah Company sell to break even? [ ] custom skins

3. If Cheetah Company sells 10,000 custom skins, what is the operating income? $ [ ]

4. Calculate the margin of safety in units and in sales revenue if 10,000 custom skins are sold.

Margin of safety in units	[ ]	units
Margin of safety in sales revenue	$ [ ]