The margin of safety is: (Check all that apply.) the difference between expected sales and break-even sales divided by expected sales. adequate if greater than 15% to 20%. the amount sales can drop before the company incurs a loss. always expressed as a dollar amount (not in units or percentages).

Question

Business

Izabelle Melendez

27 January, 17:02

The margin of safety is: (Check all that apply.) the difference between expected sales and break-even sales divided by expected sales. adequate if greater than 15% to 20%. the amount sales can drop before the company incurs a loss. always expressed as a dollar amount (not in units or percentages).

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Answers (1)

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Kiera · Answer 1

Only the following Apply:

1. the difference between expected sales and break-even sales divided by expected sales.

2. the amount sales can drop before the company incurs a loss.

Explanation:

Margin of safety can be expressed in Percentage, Dollars or Units. It is the amount by which sales may fall before making a loss.

Margin of safety : Percentage

Margin of Safety = (Expected Sales - Break Even Sales) / Expected Sales

Margin of safety : Dollars

Margin of Safety = Expected Revenue - Break Even Revenue

Margin of safety : Units

Margin of Safety = Expected Sales units - Break Even Sales units

Lastly

Adequate Margin of Safety is Entity Specific and there are no strict parameters to it.