The excess of expected sales over the sales level at the break-even point is known as the:
A) Contribution margin.
B) Margin of safety.
C) Profit margin.
D) Relevant range.
E) Sales turnover.

Question

Quizplus · Accepted Answer

Margin of safety represents the amount by which sales could decrease before the company incurs a loss. It is calculated as the difference between actual or expected sales and the sales at the break-even point. Therefore, the excess of expected sales over the sales level at the break-even point is the margin of safety.

The Excess of Expected Sales Over the Sales Level at the Break-Even