Question

Margin of safety is computed as: a. Actual sales - Break-even sales. b. Contribution margin - Fixed costs. c. Break-even sales - Variable costs. d. Actual sales - Contribution margin.

Answer 1

Answer:

A. Actual Sales - Break-even sales

Explanation:

In business studies, Margin of safety (MOS) is the difference between actual/projected/budgeted sales and the level of break even sales. It is calculated by subtracting break even sales from projected or budgeted sales.

It is usually calculated by a company to know the level of percentage by which sales can drop in that company, before they start incurring losses. IT IS A MEASURE OF BUSINESS RISK.