The Margin of Safety is the difference between: MCQ with Answer and Explanation

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The Margin of Safety is the difference between:

A. Total Revenue and Total Cost

B. Actual Sales and Break-Even Sales

C. Selling Price and Variable Cost

D. Total Cost and Variable Cost

Answer: Option B

Solution (By JKSSB Mock Tests)

Margin of safety indicates how much sales can drop before the business starts incurring a loss. Formula: Actual Sales - Break-Even Sales.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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Question #1

Which of the following is not a direct tax?

A. Minimum Alternate Tax

B. Securities Transaction Tax

C. Customs duty

D. Corporate tax

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Correct Answer: Option C

Explanation:
Customs duty is an indirect tax. Corporate tax, STT, MAT are direct taxes.

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Question #2

The 'Throughput Accounting' emphasises:

A. Maximising production volume

B. Reducing labour cost

C. Increasing fixed cost

D. Maximising throughput (sales minus material cost) while minimising operating expenses and inventory

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Correct Answer: Option D

Explanation:
Throughput accounting is based on the Theory of Constraints.

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Question #3

The 'Closing Stock' is valued on the basis of:

A. Cost or net realizable value whichever is lower

B. Cost or market price whichever is higher

C. Market price only

D. Net realizable value only

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Correct Answer: Option A

Explanation:
Prudence convention and AS 2 require lower of cost and NRV.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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