If actual sales equal break-even sales
A) the margin of safety is negative.
B) the margin of safety is positive.
C) it is impossible to say anything about the margin of safety.
D) the margin of safety equals zero.
E) the margin of safety is negative or positive.

Question

Quizplus · Accepted Answer

When actual sales equal break-even sales, the margin of safety is zero. This is because break-even sales represent the point where revenues equal total costs, so there are no profits or losses. Therefore, there is no margin of safety, which is the difference between actual sales and break-even sales.

If Actual Sales Equal Break-Even Sales