Bruce Company recently reduced its advertising budget.All other costs and revenues were unchanged.Select the response that indicates the impact of the advertising cuts on the company's break-even point and margin of safety. $\begin{array}{llcc}
&\text {Break-even Point}&\text {Margin of Safety}\
\end{array}$
A.$\begin{array}{lrr}
& \text { Increase } &&&& \text { Increase} \
\end{array}$
B.$\begin{array}{lrr}
& \text { Decrease } &&&& \text { Decrease} \
\end{array}$
C.$\begin{array}{lrr}
& \text { Increase } & &&&\text { Decrease} \
\end{array}$
D.$\begin{array}{lrr}
& \text { Decrease } &&&& \text {Increase} \
\end{array}$

Question

Bruce Company recently reduced its advertising budget.All other costs and revenues were unchanged.Select the response that indicates the impact of the advertising cuts on the company's break-even point and margin of safety. $\begin{array}{llcc}
&\text {Break-even Point}&\text {Margin of Safety}\
\end{array}$
A.$\begin{array}{lrr}
&  \text { Increase } &&&& \text {   Increase} \
\end{array}$
B.$\begin{array}{lrr}
&  \text { Decrease } &&&& \text { Decrease} \
\end{array}$
C.$\begin{array}{lrr}
&  \text {  Increase } & &&&\text { Decrease} \
\end{array}$
D.$\begin{array}{lrr}
&  \text { Decrease } &&&& \text {Increase} \
\end{array}$

Quizplus · Accepted Answer

Reducing the advertising budget decreases fixed costs, leading to a lower break-even point. With unchanged sales, the margin of safety, which is the difference between actual sales and break-even sales, increases.

Bruce Company Recently Reduced Its Advertising Budget Break-even PointMargin of Safety\begin{array}{llcc}&\text {Break-even Point}&\text {Margin of Safety}\\\end{array}​Break-even Point​Margin of Safety​

Bruce Company Recently Reduced Its Advertising Budget $\begin{array}{llcc}&\text {Break-even Point}&\text {Margin of Safety}\\\end{array}$