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    Question

    If the organisation has Budgeted sales > the Break-Even level of Sales, then Margin of Safety, would be:

    A =0 Correct Answer Incorrect Answer
    B >0 Correct Answer Incorrect Answer
    C <0 Correct Answer Incorrect Answer
    D =1 Correct Answer Incorrect Answer

    Solution

    At Break Even Sales, the organization earns no profits, and beyond this point, the organization earns profits because the entire costs are recovered at Break Even Point. Therefore, this is the safety margin for an organization. If Budgeted Sales are 450 units and Break-Even Sales are 400 units, then MOS = 450-400 i.e. 50 units

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