A contractor's overhead costs include office rent ($4,500/month), insurance ($2,800/month), and administrative salaries ($18,200/month). With an annual revenue goal of $3.6 million, what monthly revenue is needed to cover overhead costs?
Correct Answer
C) $300,000
Monthly overhead = $4,500 + $2,800 + $18,200 = $25,500. Annual overhead = $25,500 × 12 = $306,000. Monthly revenue target = $3,600,000 ÷ 12 = $300,000.
Why This Is the Correct Answer
Monthly overhead = $4,500 + $2,800 + $18,200 = $25,500. The question asks for monthly revenue to meet the annual goal: $3,600,000 ÷ 12 = $300,000. The overhead figure confirms the scale but the answer is simply the annual target divided by 12.
Why the Other Options Are Wrong
Option A: $390,000
$390,000 has no arithmetic basis; it may result from adding overhead to an incorrectly inflated revenue figure or miscalculating a markup.
Option B: $345,000
$345,000 could arise from dividing an incorrect annual figure or applying a faulty overhead percentage to the monthly target, but does not match the correct calculation.
Option D: $255,000
$255,000 is less than the correct answer and may result from subtracting the monthly overhead ($25,500) from $280,500 or from another arithmetic error.
Memory Technique
Annual revenue ÷ 12 = monthly target. Lock in: $3.6M ÷ 12 = $300K. The overhead sum ($25,500/month) is a sanity-check figure, not the answer itself.
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