Answer:
The Actuarially Fair Premium that Tom have to pay for hid Health Insurance is $4,160
Explanation:
To compute the amount that Tom have to pay for Health Insurance is;
Actuarially Fair Premium = (Probability of actuality ill × Payments incurred) + (Probability of not actuality ill × Payments incurred)
Actuarially Fair Premium = (20% x $20,000) + (80% x $200)
Actuarially Fair Premium = $4,000 + $160
Actuarially Fair Premium = $4,160
To determine the breakeven point in units, divide the fixed
costs by the contribution margin ratio.
To add, the contribution margin ratio is the
percentage ofcontribution margin to net sales.
Said differently, it is the difference between a company's sales and variable
expenses, expressed as a percentage.