COST ACCOUNTING
COST VOLUME PROFIT ANALYSIS
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]


TRUE


FALSE

Detailed explanation1: The margin of safety can be expressed as a dollar amount, a percentage, or a number of units. Actual sales for the month were 8, 000 units. The contribution margin per unit is $50 ($80$30). The margin of safety is 70%, which gives the company a significant cushion over its breakeven point.
Detailed explanation2: In accounting, the margin of safety is calculated by subtracting the breakeven point amount from the actual or budgeted sales and then dividing by sales; the result is expressed as a percentage.
Detailed explanation3: Margin of safety is calculated as a percentage by subtracting the breakeven point from the current sales level and dividing by the current sales level. It can also be expressed in number of units or dollar amount.
Detailed explanation4: Margin of safety = (Actual sales – Breakeven sales) ÷ Selling price per unit.