Final answer:
The concept relating to units or revenue above the break-even volume is called the margin of safety. The correct answer is option b.
Step-by-step explanation:
The units sold or expected to be sold or the revenue earned or expected to be earned above the break-even volume is referred to as the margin of safety. The margin of safety measures how much sales can fall before a business reaches its break-even point.
It is an important financial metric used to determine the level of risk associated with a business's sales projections and financial health. In contrast, the contribution margin is the sales price per unit minus the variable cost per unit. The operating leverage refers to how a firm can increase profits by increasing sales once fixed costs have been covered. Finally, gross margin is the difference between sales and the cost of goods sold.
Fundamentally, understanding the margin of safety can help businesses plan for uncertainties in the market. By knowing how much sales can decline before actually losing money puts the business in a better position to manage risks. This concept also plays a crucial role in budgeting, forecasting, and strategic planning within a firm's financial practices.