Exercise 16-8 Contribution Margin, Break-Even Units, Contribution Margin Income Statement, Margin of Safety Cheetah Company manufactures custom-designed skins (covers) for iPods and other portable electronic devices. Variable costs are $9.20 per custom skin, the price is $19, and fixed costs are $104,860. Required:

1. What is the contribution margin for one custom skin?

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

3. If Cheetah 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.

3. Operating Income Sales Less: Variable costs Contribution margin Less: Fixed expenses Operating income \begin{tabular}{|} \hline \\ \hline \\ \hline$22,540 \\ \hline \hline \end{tabular} 4. Margin of Safety In units: Sold units Break-even units Margin of safety In sales revenue: Sales revenue Break-even sales Margin of safety 13,00010,7002,300