Question

The difference between actual sales and breakeven point is known as

• A. Margin of safety
• B. Price-cost margin
• C. Contribution
• D. Profit

Answer 1

Answer:

A. Margin of safety

Margin of safety is the difference between actual sales and breakeven point. It indicates the business's ability to earn profit even if there is a reduction in output. The breakeven point is where total cost is equal to total sales and there is no profit or loss. The Margin of safety ratio is calculated using the formula (M/S) = (Sales - Break-even point sales) / Present sale.