1. The margin of safety is:

the excess of budgeted or actual sales over budgeted or actual variable expenses.

the excess of budgeted or actual sales over budgeted or actual fixed expenses.

the excess of budgeted or actual sales over the break-even volume of sales.

the excess of budgeted net operating income over actual net operating income.

2. Amarillo Company experienced the following events during its first accounting period. (1) Purchased $5,000 of inventory on account under terms 1/10/n30. (2) Returned 1,000 of the inventory purchased in Event 1. (3) Paid the remaining balance in account payable for the inventory purchased in Event 1. If the Company pays the account payable after the discount period has expired, how much cash will be required to settle the liability?

$3,960.

$4,000.

zero.

$5,000