What effect would a decrease in wage rates (applicable to direct,strictly variable,labor)have on the break-even point and the contribution margin?
Break-even Point Contribution Margin
A)Increase Increase
B)Increase Decrease
C)Decrease Increase
D)Decrease Decrease

Question

Quizplus · Accepted Answer

A decrease in wage rates of direct, strictly variable labor would lead to a decrease in the break-even point because each unit of production can now be sold for a lower price due to lower labor costs. At the same time, the contribution margin would increase because the cost of producing each unit has decreased, leading to an increase in the amount of money left over to cover fixed costs and generate profit.

What Effect Would a Decrease in Wage Rates (Applicable to Direct,strictly