What would be the effect on the break-even point if sales remain the same and the margin of safety increases?
A)The break-even point would increase.
B)The break-even point would decrease.
C)The break-even point would decrease by half.
D)The break-even point would remain the same.

Question

Quizplus · Accepted Answer

If the margin of safety increases, it means the actual sales are higher than the break-even point. This implies that the break-even point has reduced since the required sales volume to make a profit has decreased due to the increased margin of safety. Therefore, the break-even point would decrease.

What Would Be the Effect on the Break-Even Point If