On January 1,2016,Randolph Co.increased its direct labor wage rates.All other budgeted costs and revenues were unchanged.How did this increase affect Randolph's budgeted break-even point and budgeted margin of safety? (CPA adapted) $$\begin{array} { | c | c | c | }
\hline & \text { Buogeted Break-oren } & \text { Budgeted Margin of } \
\text { Point } & \text { Safety } \
\text { A. } & \text { Increase } & \text { Increase } \
\hline \text { B. } & \text { Increase } & \text { Decrease } \
\hline \text { C. } & \text { Decrease } & \text { Decrease } \
\hline \text { D. } & \text { Decrease } & \text { Increase } \
\hline
\end{array}$$

Question

On January 1,2016,Randolph Co.increased its direct labor wage rates.All other budgeted costs and revenues were unchanged.How did this increase affect Randolph's budgeted break-even point and budgeted margin of safety? (CPA adapted) $$\begin{array} { | c | c | c | } 
\hline & \text { Buogeted Break-oren } & \text { Budgeted Margin of } \
\text { Point } & \text { Safety } \
\text { A. } & \text { Increase } & \text { Increase } \
\hline \text { B. } & \text { Increase } & \text { Decrease } \
\hline \text { C. } & \text { Decrease } & \text { Decrease } \
\hline \text { D. } & \text { Decrease } & \text { Increase } \
\hline
\end{array}$$

Quizplus · Accepted Answer

An increase in direct labor wage rates raises variable costs, which increases the break-even point. Consequently, the margin of safety decreases as the difference between actual sales and break-even sales narrows.

On January 1,2016,Randolph Co A) Option a B) Option B C) Option C D)

On January 1,2016,Randolph Co A) Option a
B) Option B
C) Option C
D)