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Exercise Your Knowledge

3) What is one of the steps to improve the margin of safety?

a) Increasing the selling price per unitFeedback: Incorrect! While increasing the selling price per unit might lead to higher revenues, it does not directly contribute to improving the margin of safety. The margin of safety is concerned with the difference between actual sales and the break-even point, rather than the selling price.

b) Increasing the break-even outputFeedback: Incorrect! Increasing the break-even output would mean producing and selling more units, which may increase sales volume but does not necessarily improve the margin of safety. The margin of safety focuses on the gap between actual sales and the break-even point, not the level of production.

c) Reducing the variable expensesFeedback: Correct! One of the steps to improve the margin of safety is to reduce the variable expenses. By lowering the costs associated with producing each unit, the business can increase its profit margin and create a larger buffer between actual sales and the break-even point.

d) Decreasing the sales volumeFeedback: Incorrect! Decreasing the sales volume would have a negative impact on the margin of safety, as it would reduce actual sales. The objective is to maintain or increase sales while reducing costs to improve the margin of safety.

Parabéns! Respostas enviadas. Aguarde.

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