The Margin of Safety Is Equal To

question 120

Multiple Choice

The margin of safety is equal to:

• A)Sales - Net income.
• B)Sales - (Variable expenses + Fixed expenses).
• C)Sales - (Variable expenses/Contribution margin).
• D)Sales - (Fixed expenses/Contribution margin ratio).

---

Definitions:

Manufacturing

The process of producing goods through the combination of labor, machinery, tools, and chemical or biological processing or formulation.

Raw Materials Inventory

The total cost of all components and materials that are held by a company and intended for use in the production of goods.

Conversion Costs

Costs associated with converting raw materials into finished goods, typically including labor and overhead expenses.

Finished Goods

Goods that have finished the production process and are prepared for purchase by customers.