If a company desires to increase its safety margin, it should:
A) increase fixed costs.
B) decrease the contribution margin.
C) decrease selling prices, assuming the price change will have no effect on demand.
D) stimulate sales volume.
E) attempt to raise the break-even point.

Question

Quizplus · Accepted Answer

Stimulating sales volume increases the number of units sold, which in turn increases total contribution margin and profits, thereby increasing the safety margin. The safety margin is the difference between actual or budgeted sales and the break-even sales level; increasing sales volume directly impacts this positively.

If a Company Desires to Increase Its Safety Margin, It