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Breakeven is 2,400 units a month and actual sales for the month were 8,000 units. What is the margin of safety in units?
A2,400 units
B4,800 units
C8,000 units
D5,600 units
Answer & Solution
Correct answer: D. 5,600 units
1. The margin of safety measures how far actual sales sit above the breakeven point.
2. In units it is actual units sold minus breakeven units.
3. 8,000 minus 2,400 gives 5,600 units.
4. Sales could fall by 5,600 units before the company stopped covering its costs.
5. 8,000 units is the actual volume itself, not the cushion above breakeven.
_Source: Jonick, Principles of Managerial Accounting (UNG Press, CC BY-SA 4.0), section 5.5 Margin of Safety_
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