6-10 The margin of safety is the excess of
shift would cause the average contribution mar-
budgeted (or actual) sales over the break-even
gin ratio in the company to decline, resulting in
volume of sales. It states the amount by which
less total contribution margin for a given amount
sales can drop before losses begin to be in-
of sales. Thus, net operating income would de-
curred.
cline. With a lower contribution margin ratio, the
break-even point would be higher since it would
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