If Actual Sales Equal Break-Even Sales

question 77

Multiple Choice

If actual sales equal break-even sales

• A) the margin of safety is negative.
• B) the margin of safety is positive.
• C) it is impossible to say anything about the margin of safety.
• D) the margin of safety equals zero.
• E) the margin of safety is negative or positive.

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Definitions:

Fixed Costs

Expenses that do not change in total despite fluctuations in the level of output or sales volume, such as rent or salaries.

Operating Income

The profit realized from a business's core operations, excluding income from investments and the effects of taxes and interest.

Variable Costs

Costs that vary in direct proportion to the level of production or sales volume, like raw materials and direct labor.

Fixed Costs

Costs that do not vary with the level of production or sales over a specified period, such as rent or salaries.