Fawn Company's margin of safety is $90,000. If the company's sales drop by $80,000, it will still have positive net operating income.

Question

Quizplus · Accepted Answer

Since the margin of safety is $90,000, the company's current sales are $90,000 above its breakeven point. This means that if sales drop by $80,000, the company would still be generating $10,000 in net operating income, which is positive. Therefore, the statement is true.

Fawn Company's Margin of Safety Is $90,000