Question

b Identify from your graph: the break-even level of output; the current safety margin: the level of profit at an output level of 9000. ​

Answer 1

Answer:

In budgeting and break-even analysis, the margin of safety is the gap between the estimated sales output and the level by which a company’s sales could decrease before the company becomes unprofitable. It signals to the management the risk of loss that may happen as the business is subjected to changes in sales, especially when a significant amount of sales are at risk of decline or unprofitability.

A low percentage of margin of safety might cause a business to cut expenses, while a high spread of margin assures a company that it is protected from sales variability.

Explanation:

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