Business FinancesQuestion 1117 of 1605
A contractor has fixed costs of $90,000 per year. His contribution margin (price minus variable cost) is 30% of revenue. What annual revenue does he need to break even?
a.$300,000
b.$27,000
c.$117,000
d.$270,000
Explanation
Break-even revenue = fixed costs / contribution margin ratio = $90,000 / 0.30 = $300,000. At $300,000 revenue, the 30% contribution margin ($90,000) exactly covers fixed costs, leaving zero profit.
Practice all 1605 questions free — no signup required.
Related questions on this topic
- Overhead costs are best described as:
- A contractor completes $800,000 in revenue with $560,000 direct costs and $160,000 overhead. What is the net profit and net profit margin?
- If a contractor underestimates his overhead rate when bidding, the most likely result is:
- A contractor's fixed (overhead) costs are $60,000/year. Each job nets $2,000 of contribution margin. How many jobs must he complete to break even?
- The break-even point is best defined as the level of sales at which:
- A contractor has $100,000 fixed costs and a contribution margin ratio of 25%. If he wants a $50,000 profit, what revenue is required?
Last reviewed: · editorial process
Sen Lin, PrepPass Founder · Verified against California CSLB Contractor License Law & Business Exam · How we review
Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)