Question

Margin of safety is the difference between actual sales and sales at the break-even point. True False

Answer 1

Answer: The correct answer is : True

Explanation: The safety margin is the difference between actual or budgeted sales and the level of equilibrium sales. The breakeven point is the level of sales where the total fixed and variable cost is equal to the total income. The breakeven point is a level at which the company does not make a profit but neither does it obtain losses.