Question

The Margin of safety may be defined as

• A. The difference between planned sale and break even point sales
• B. The excess of planned sales over the current actual sales
• C. The point at which break-even point sales are achieved
• D. The extent to which sales revenue exceeds fixed costs

Answer 1

The correct option is A The difference between planned sale and break even point sales

In accounting, margin of safety is the extent by which actual or projected sales exceed the break even sales.

Margin of safety ratio equals the difference between budgeted sales and break-even sales divided by budget sales.