Margin of safety in units is calculated as budgeted sales units minus breakeven sales units. If budgeted sales are 15,000 and breakeven sales are 5,000, what is the MOS in units?

Margin of safety in units is calculated as budgeted sales units minus breakeven sales units. If budgeted sales are 15,000 and breakeven sales are 5,000, what is the MOS in units?

• A. 5,000
• B. 15,000
• C. 20,000
• D. 10,000

Answer: (D)

Margin of safety in units shows how far budgeted sales can fall before hitting the break-even point. It’s found by subtracting the break-even quantity from the budgeted quantity. Here, budgeted sales are 15,000 units and break-even is 5,000 units, so MOS in units = 15,000 − 5,000 = 10,000 units. This means sales could drop by up to 10,000 units before losses begin. The other numbers don’t fit because they don’t reflect the difference between budgeted and break-even sales.

Margin of safety in units shows how far budgeted sales can fall before hitting the break-even point. It’s found by subtracting the break-even quantity from the budgeted quantity. Here, budgeted sales are 15,000 units and break-even is 5,000 units, so MOS in units = 15,000 − 5,000 = 10,000 units. This means sales could drop by up to 10,000 units before losses begin. The other numbers don’t fit because they don’t reflect the difference between budgeted and break-even sales.