reducing the fixed cost
increasing the selling price
reducing variable cost
all the above ways
Answer is Right!
Answer is Wrong!
The correct answer is D. all the above ways.
The margin of safety is the difference between sales and break-even sales. It is a measure of how much sales can decline before a company starts to lose money.
There are three ways to increase the margin of safety:
- Reduce fixed costs. Fixed costs are costs that do not change with the level of production, such as rent, insurance, and salaries. By reducing fixed costs, a company can lower its break-even point and increase its margin of safety.
- Increase selling price. Selling price is the amount of money that a company charges for its products or services. By increasing selling price, a company can generate more revenue and increase its margin of safety.
- Reduce variable costs. Variable costs are costs that change with the level of production, such as the cost of materials and labor. By reducing variable costs, a company can lower its break-even point and increase its margin of safety.
It is important to note that increasing the margin of safety does not guarantee that a company will be profitable. However, it does give the company a cushion in case sales decline.