Margin of safety is the excess of actual or expected sales over break-even sales. It represents the amount by which sales can decrease before the business starts to incur losses. A higher margin of safety indicates a more secure financial position for the company. Options A, C, and D do not accurately describe margin of safety.

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Margin of Safety Is

Question 60

Multiple Choice

Margin of safety is:

A) the amount by which sales revenue exceeds variable costs.
B) the excess of actual or expected sales over break-even sales.
C) the amount by which actual sales exceed expected sales.
D) equal to the contribution margin.

Correct Answer: