Use the following information for the next 5 questions.
SXF sells its single product for $14 per unit, and its variable cost per unit is $4. Total fixed costs are $800. Its CVP graph is as follows:

-If SXF increases its sales volume by 10%, what will happen to its margin of safety?
A) It will decrease
B) It will increase
C) It will stay the same
D) Cannot be determined

Question

Use the following information for the next 5 questions.
SXF sells its single product for $14 per unit, and its variable cost per unit is $4. Total fixed costs are $800. Its CVP graph is as follows:
 
-If SXF increases its sales volume by 10%, what will happen to its margin of safety?
A) It will decrease 
B) It will increase 
C) It will stay the same 
D) Cannot be determined

Quizplus · Accepted Answer

The margin of safety will increase because a higher sales volume increases the difference between actual sales and break-even sales, thus increasing the margin of safety.

Use the Following Information for the Next 5 Questions