[amp_mcq option1=”the point at which break-even point sales are achieved” option2=”the excess of planned sales over the current actual sales” option3=”the extent to which sales revenue exceeds fixed costs” option4=”the difference between planned sales and break-even point sales” correct=”option4″]
The correct answer is: D. the difference between planned sales and break-even point sales.
The margin of safety is the amount of sales revenue that a company can lose before it starts to incur losses. It is calculated by subtracting the break-even point sales from the planned sales. The break-even point is the point at which a company’s total revenue equals its total costs.
A high margin of safety indicates that a company is well-positioned to withstand a decline in sales. A low margin of safety, on the other hand, indicates that a company is more vulnerable to a decline in sales.
Option A is incorrect because it defines the break-even point, not the margin of safety.
Option B is incorrect because it defines the excess of planned sales over the current actual sales, not the margin of safety.
Option C is incorrect because it defines the extent to which sales revenue exceeds fixed costs, not the margin of safety.