The margin of safety is the amount:
A)by which the sales price per unit exceeds the variable cost per unit.
B)that the contribution margin exceeds fixed cost.
C)by which the profit calculated under absorption costing exceeds the profit calculated under variable costing.
D)that sales can decrease before the company will suffer a loss.

Question

Quizplus · Accepted Answer

The margin of safety is the amount by which sales can decrease before the company will suffer a loss. It is a measure of the level of risk associated with a company's operations. A higher margin of safety indicates a lower level of risk, while a lower margin of safety indicates a higher level of risk. Options A, B, and C are all related to other financial concepts and not directly related to the margin of safety.

The Margin of Safety Is the Amount