The Margin of Safety in Dollars Is Calculated By

question 93

Multiple Choice

The margin of safety in dollars is calculated by:

• A) deducting the contribution margin from expected sales.
• B) deducting break-even sales from expected sales.
• C) deducting total variable cost from sales revenue.
• D) deducting total fixed costs from sales.
• E) deducting actual profit from expected profit.

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Definitions:

Long-run Equilibrium

A state in which all factors of production and costs are variable, allowing firms in a perfectly competitive market to make zero economic profit, balancing supply and demand.

Maximum Profits

The highest possible financial gain that a business can achieve in a given period, optimizing revenue while minimizing costs.

Long-run Equilibrium

A state in which supply equals demand and all factors of production and markets are in balance, typically considered in the context of perfect competition.

Purely Competitive

A market scenario where products are identical, leading to numerous sellers and buyers where no single entity can influence market prices.