CAF-5 · Chapter 13 · Question 3 of 10
Entity E has monthly expected sales of Rs. 128,000. If the margin of safety is given as 6.25%, what is the break-even sales revenue for the entity?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Rs. 120,000
Explanation
The Margin of Safety is the difference between actual/expected sales and break-even sales. Margin of Safety in Rs = 6.25% of Expected Sales (128,000) = Rs. 8,000. Break-even Sales = Expected Sales - Margin of Safety = 128,000 - 8,000 = Rs. 120,000.
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