The margin of safety would be negative if a company('s)
A)was presently operating at a volume that is below the break-even point.
B)present fixed costs were less than its contribution margin.
C)variable costs exceeded its fixed costs.
D)degree of operating leverage is greater than 100.

Question

Quizplus · Accepted Answer

The margin of safety is the difference between actual sales and break-even sales. If a company is presently operating at a volume that is below the break-even point, it means that the actual sales are less than the break-even sales, therefore the margin of safety would be negative.

The Margin of Safety Would Be Negative If a Company('s)