What is measured by margin of safety in units?

Margin of safety in units is a critical metric that indicates how far sales can drop before a business reaches its breakeven point. It reflects the difference between the current sales levels and the quantity of sales needed to cover all fixed and variable costs.

The margin of safety is calculated by taking the total units sold and subtracting the breakeven point in units. This measurement helps businesses evaluate their risk and assess how many additional units they can afford to lose before they become unprofitable. If current sales units are significantly higher than the breakeven point, the margin of safety is large, indicating a lower risk of losses.

The other provided options relate to different metrics or do not accurately represent the specific measure of margin of safety. For example, total units produced do not reflect the sales performance necessary to assess profitability, while merely subtracting minimum required units or breakeven units from units sold may not provide the complete picture of safety in terms of financial risk.