The margin of safety is the difference between:
A)budgeted expenses and breakeven expenses
B)budgeted revenues and breakeven revenues
C)actual operating income and budgeted operating income
D)actual contribution margin and budgeted contribution margin

Question

Quizplus · Accepted Answer

The margin of safety is the difference between the budgeted/sales revenue and the breakeven/sales revenue. It represents the amount by which sales can decrease before the business starts incurring losses. Therefore, option B is the correct answer. Option A reflects the difference between expenses, which is not the concept of margin of safety. Option C and D represent the difference between actual and budgeted figures, which may not be useful in determining the margin of safety.

The Margin of Safety Is the Difference Between