Which of the following statements regarding margin of safety is correct?
A) If fixed expenses increase, a company's margin of safety will increase.
B) If the break-even point for sales drops, then a company's margin of safety will increase.
C) The margin of safety represents the point at which contribution margin exceeds variable costs.
D) The margin of safety can be measured only in sales dollars and is the point at which a company begins to earn a profit.

Question

Quizplus · Accepted Answer

The margin of safety can be measured in sales dollars or in units and is the difference between actual, targeted, or projected sales and break-even sales. As break-even declines, margin of safety will increase.

Which of the Following Statements Regarding Margin of Safety Is