If an accounting firm experiences a substantial increase in the costs of staffing various audit engagements, what is a possible result?

Question

Quizplus · Accepted Answer

For a consulting firm, labor costs are variable costs, and any increase in these costs will result in a lower contribution margin. This means that thebreak-even point will rise as the contribution margin declines and the current margin of safety will drop, since it requires more sales revenues to reachthe break-even point.

If an Accounting Firm Experiences a Substantial Increase in the Costs