The margin of safety is the excess of:
A) Break-even sales over expected sales.
B) Expected sales over variable costs.
C) Expected sales over fixed costs.
D) Fixed costs over expected sales.
E) Expected sales over break-even sales.

Question

Quizplus · Accepted Answer

The margin of safety is the difference between the actual or expected sales and the break-even sales. This represents the amount by which sales can decrease before the company incurs a loss. Therefore, the correct choice is E, "Expected sales over break-even sales."

The Margin of Safety Is the Excess Of