What is the margin of safety percentage when budgeted sales are 15,000 and breakeven sales are 5,000?

Unlock all questions

This demo includes only 20 questions. Upgrade to access hundreds of questions, flashcards, exam simulations, and disable ads.

Full question bankExam simulationsFlashcards
From $9.99Unlock all

Enhance your management accounting skills with the AAT Level 3 MATS Test. Utilize multiple choice questions with detailed explanations to prepare for the exam confidently.

Multiple Choice

What is the margin of safety percentage when budgeted sales are 15,000 and breakeven sales are 5,000?

Explanation:
The margin of safety shows how much sales can fall before hitting the break-even point. It is calculated as (budgeted sales − break-even sales) ÷ budgeted sales × 100. Here, budgeted sales are 15,000 and break-even sales are 5,000. The difference is 10,000. So the margin of safety is 10,000 ÷ 15,000 = 2/3 ≈ 66.7%. This means sales could drop by about 66.7% before the business would no longer cover its costs.

The margin of safety shows how much sales can fall before hitting the break-even point. It is calculated as (budgeted sales − break-even sales) ÷ budgeted sales × 100.

Here, budgeted sales are 15,000 and break-even sales are 5,000. The difference is 10,000. So the margin of safety is 10,000 ÷ 15,000 = 2/3 ≈ 66.7%.

This means sales could drop by about 66.7% before the business would no longer cover its costs.

More Multiple Choice Questions
Subscribe

Get the latest from Examzify

You can unsubscribe at any time. Read our privacy policy