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.

you get a crown by getting lots of points and you get points by answering other peoples questions

answercontrol is returned to method c;