Selling price $ 200 per unit
variable expenses $ 150 per unit
fixed expenses $ 1,000,000 per year
unit sales 25,000 per year

knowledge check 01: what is ralph corporation’s margin of safety in dollars?

a. $4 million
b. $5 million
c. $1 million
d. $2.2 million

knowledge check 02: what is ralph corporation’s margin of safety in percentage?

a. 20%
b. 100%
c. 80%
d. 50%

1) Margin of safety = $1,000,000 so that is c)

2) Margin of safety (%) = 20%, that is a)

Explanation:

Hi, first, we need to introduce the formulas to use.

Margin of safety (Dollars)

Margin of safety (%)

Where

BEP = Break even point in dollars

This means that we need to find the break even point first, the formula to use is:

From there, we need the break even point in dollars, so:

Everything should look like this

And the BEP in dollars is:

Now, we know that our actual level of sales is 25,000*$200=$5,000,000, therefore Ralph Corporation margin of safety is:

So, the answer is c. Ralph Corporation’s margin of safety in dollars is $1 million.

Now for the next part, everything should look like this.

Then, the answer is a.  Ralph Corporation’s margin of safety in percentage is 20%

Best of luck.

month 1 start amount =$3287.90 interest=(3287.90x0.0145/12)3.97 total to pay=$3291.81 paid =$1200 balance =$2,091.87

month 2 starting amount= $2,091.87 interest =$25.28 total to pay =$2117.15 paid =$1200 balance $917.15

month 3 starting amount =$917.15 interest =$11.08 total to pay =$928.23 paid =$928.23 balance =$0 total to pay 1200+1200+928.23 = $3328.23 it will take 3 months to pay a total of $3328.23

answer; im thinking customer: