Final answer:
The margin of safety in dollars is the excess of budgeted or actual sales over the break-even sales, indicating how much sales can decrease before reaching the break-even point. The correct option is B. budgeted (or actual) sales minus break-even sales.
Step-by-step explanation:
The question is about the concept of margin of safety in dollars within the field of accounting and finance. The margin of safety represents the difference between the actual or budgeted sales and the break-even sales. It is the excess of current or projected sales over the break-even sales, which indicates how much sales can fall before a company reaches its break-even point.
Mathematically, it's calculated by subtracting break-even sales from actual or budgeted sales. Therefore, the correct option is B. budgeted (or actual) sales minus break-even sales.
Understanding margin of safety helps businesses to manage risk as it shows how much slack the business currently has before it would start to incur losses. This concept is critical in financial planning and decision making.