ECONOMICS

Detailed explanation-1: -The amount by which a company’s sales can decline before losses are incurred is called the: contribution margin.

Detailed explanation-2: -The margin of safety is the amount by which sales can decrease before losses are incurred by the company. The margin of safety percentage is equal to the margin of safety in dollars divided by total contribution margin.

Detailed explanation-3: -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.

Detailed explanation-4: -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-5: -Operating leverage will decrease as the company’s margin of safety increases. 15. The overall contribution margin ratio for a company producing three products may be obtained by adding the contribution margin ratios for the three products and dividing the total by three.