SXF sells its single product for $14 per unit, and its variable cost per unit is $4. Total fixed costs are $800. Its CVP graph is as follows: If SXF increases its sales volume by 10%, what will happen to its margin of safety?
A) It will decrease
B) It will increase
C) It will stay the same
D) Cannot be determined

Question

Quizplus · Accepted Answer

If SXF increases its sales volume by 10%, its total sales revenue will increase, which will lead to an increase in its contribution margin. As fixed costs remain constant, the increase in contribution margin will increase the margin of safety. Therefore, the correct answer is B, it will increase.

SXF Sells Its Single Product for $14 Per Unit, and Its