The margin of safety is important information because it can help a company's management determine which of the following?
A) Where to cut fixed costs in order to ensure profitability
B) How much the company is exceeding break-even sales revenue levels
C) How much the company needs in sales revenues to meet company's profit targets and objectives
D) How to forecast profit and expenses and what operating income can be expected based on different sales levels

Question

Quizplus · Accepted Answer

The margin of safety can be measured in sales dollars or in units and is the difference between actual, targeted, or projected sales and break-even sales. The margin of safety is the level of current or forecasted sales revenue that exceeds the break-even point.

The Margin of Safety Is Important Information Because It Can