Question

The margin of safety is: A) the excess of budgeted or actual sales over budgeted or actual variable expenses. B) the excess of budgeted or actual sales over budgeted or actual fixed expenses. C) the excess of budgeted or actual sales over the break-even volume of sales. D) the excess of budgeted net operating income over actual net operating income

Answer 1

Answer:

The correct answer is letter "C": the excess of budgeted or actual sales over the break-even volume of sales.

Explanation:

The margin of safety represents the current level of the sales of a company after it surpassed the break-even point. The sales break-even point volume represents the stage in which the firm does not make profits but does not incur losses. Then, the margin value is useful so the organization knows how far or close its sales are from not generating revenue.