COST ACCOUNTING
BREAK EVEN POINT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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total revenue minus total costs
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fixed plus variable costs
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actual output plus break even point
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actual output minus break even point
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Detailed explanation-1: -What is Margin of Safety? The margin of safety is the difference between the amount of expected profitability and the break-even point. The margin of safety formula is equal to current sales minus the breakeven point, divided by current sales.
Detailed explanation-2: -The margin of safety is the difference between actual sales and break-even sales, while the degree of operating leverage (DOL) shows how a company’s operating income changes after a percentage change in its sales.
Detailed explanation-3: -Margin of Safety is defined as the extra sales over and above the break even sales. This signifies the safer zone for the organization ensuring that there will be no loss to the organization. Example: Selling Price Rs.10 P/U, No. of units sold 1000.