The margin of safety is the difference between:
A)actual sales and budgeted sales.
B)actual sales and break-even sales.
C)target sales and actual sales.
D)target sales and budgeted sales.

Question

Quizplus · Accepted Answer

The margin of safety is the difference between actual sales and break-even sales, which represents the amount of sales that can decline before the company starts incurring losses. Option A is incorrect because it refers to the sales variance, not the margin of safety. Option C is incorrect because it refers to the sales shortfall, not the margin of safety. Option D is incorrect because it refers to the sales variance, not the margin of safety.

The Margin of Safety Is the Difference Between