In Evaluating the Margin of Safety the

question 137

Multiple Choice

In evaluating the margin of safety the

• A) break-even point is not relevant.
• B) higher the margin of safety ratio the greater the margin of safety.
• C) higher the dollar amount the lower the margin of safety.
• D) higher the margin of safety ratio the lower the fixed costs.

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Definitions:

Direct Materials

Direct materials are raw materials that are directly traceable to the manufacturing of a specific product and are an essential component of its production.

Production Budget

An estimate of the total units to be produced in a given period, considering forecasted sales and desired inventory levels.

Cash Receipts

The collection of money, including currency, checks, and electronic transfers, by a business.

Sales Budget

An estimate of future sales, often detailed in terms of volume and revenue, used for planning and controlling a business's operations.