The margin of safety is:
A)the excess of budgeted or actual sales over budgeted or actual variable expenses.
B)the excess of budgeted or actual sales over budgeted or actual fixed expenses.
C)the excess of budgeted or actual sales over the break-even volume of sales.
D)the excess of budgeted net operating income over actual net operating income.

Question

Quizplus · Accepted Answer

The margin of safety is the amount by which actual or expected sales exceed the break-even point of sales. This represents the cushion the business has against unexpected declines in sales or increases in expenses. Option A describes the contribution margin, option B describes the contribution margin ratio, and option D describes the variance between budgeted and actual net operating income.

The Margin of Safety Is