Gralyn Corp

question 90

Multiple Choice

Gralyn Corp. compares two products' margin of safety ratios (MOS%) . Product A has a ratio of 0.13 and product B has a ratio of 0.31. Everything else held constant, what should the managers at Gralyn Corp. do and why?

• A) They should choose Product A because it will cost less than half as much to produce.
• B) They should choose Product A because it is less risky and might require less management attention than Product B.
• C) They should choose Product B because it will produce more than double the profit of Product A.
• D) They should choose Product B because it is less risky and might require less management attention than Product A.

---

Definitions:

Express Warranties

Explicit guarantees provided by a seller regarding the quality, condition, or performance of a product.

Implied Warranties

Legal guarantees assumed in a transaction that the product will meet a minimum level of quality and functionality.

Fitness for a Particular Purpose

A warranty in commercial transactions that a product will meet the specific requirements of the buyer, as known by the seller at the time of sale.

Merchantability

A guarantee that a product will meet reasonable quality and performance expectations as implied in a sales contract.