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    Question

    The difference between actual sales and sales at

    break-even point is called:
    A Contribution Correct Answer Incorrect Answer
    B Margin of safety Correct Answer Incorrect Answer
    C P/V ratio Correct Answer Incorrect Answer
    D Operating leverage Correct Answer Incorrect Answer
    E Fixed cost Correct Answer Incorrect Answer

    Solution

    Margin of Safety (MOS) = Actual Sales − Break-even Sales.  It measures how much sales can drop before the firm reaches break-even. A higher MOS indicates lower business risk. Example: Sales = ₹10,00,000; BEP Sales = ₹7,50,000 → MOS = ₹2,50,000 (25%).

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