What is Margin of Safety?
Answers
Answer:
Margin of safety, also known as MOS, is the difference between your breakeven point and actual sales that have been made. Any revenue that takes your business above break even can be considered the margin of safety, this is once you have considered all the fixed and variable costs that the company must pay.
Explanation:
Definition:
The margin of safety is the amount of sales over a company’s break-even point. In other words, the margin of safety is the amount of sales a company can lose before it actually starts to lose money or stops making a profit.
What Does Margin of Safety Mean?
Managerial accountants analyze production processes and market demand to estimate how much of a product they will be able to sell in a period. Based on these calculations, the produces products.
The breakeven point for a production process is when the sales income from the goods produced equals the actual cost of producing the products. This is where the company breaks even and doesn’t actually make a profit.