COST ACCOUNTING
BREAK EVEN POINT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The difference between current output and break even output
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Is calculated by Current output-Break even output
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Lets owners know how much sales can fall before they start to make a loss
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Shows the profits that will be made
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Detailed explanation-1: -Margin of safety is a principle of investing in which an investor only purchases securities when their market price is significantly below their intrinsic value. In other words, when the market price of a security is significantly below your estimation of its intrinsic value, the difference is the margin of safety.
Detailed explanation-2: -The margin of safety is a financial ratio that measures the amount of sales that have exceeded the break-even point. This financial ratio indicates the actual profit of the company once it pays for all fixed and variable costs.
Detailed explanation-3: -What is the definition of “margin of safety"? The margin of safety (MOS) is the difference between your gross revenue and your break-even point. Your break-even point is where your revenue covers your costs but nothing more. In other words, your business does not make a loss but it doesn’t make a profit either.
Detailed explanation-4: -The expected sales beyond breakeven sales is known as margin of safety. As a result, the margin of safety is the amount sales can drop before the company suffers an operating loss. It is like a cushion between profit and loss.