COST ACCOUNTING
COST BEHAVIORS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Effects of changes in selling prices, fixed costs and variable costs over cost volume profit through calculations.
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The higher the value of the margin of safety, the more comfortable the business.
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It shows how far sales could fall before the company begins operating at a loss.
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Difference between actual sales (or expected sales) and sales at the break-even point.
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Detailed explanation-1: -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: -If the margin of safety is high, even a small decline in sales revenue may result in an operating loss.
Detailed explanation-3: -A company’s margin of safety is the difference between its current sales and its break-even sales. The margin of safety tells the company how much they could lose in sales before the company begins to lose money, or, in other words, before the company falls below the break-even point.
Detailed explanation-4: -A company with greater variable costs compared to fixed costs shows a more consistent per-unit cost and, therefore, a more consistent gross margin, operating margin, and profit margin.