A soccer match has an audience of 40,000 and 30,000 spectators are required to breakeven. Each ticket costs $40, which of the following best describes the margin of safety:
A) $40,000
B) 10,000 spectators
C) None of the above
D) Both a and b

Question

Quizplus · Accepted Answer

Margin of safety is the number or absolute value of sales a business can afford to lose before it reaches breakeven. In this case the organisers of the football match can afford to lose 10,000 spectators. We are also told that tickets are $40, therefore they can afford to lose $40,000 in sales. Answer D is therefore the best answer as it includes both the value of sales and the number of sales.

A Soccer Match Has an Audience of 40,000 and 30,000