If fixed costs go up and all other factors remain the same, the margin of safety will become smaller.

Question

Quizplus · Accepted Answer

The margin of safety is the difference between actual sales and breakeven sales. If fixed costs go up, the breakeven point will increase, which means actual sales must increase to maintain the same margin of safety. If all other factors remain the same and actual sales do not increase, the margin of safety will become smaller.

If Fixed Costs Go Up and All Other Factors Remain