If Total overhead is 60,000 and Total direct salary is 120,000, Break-even Multiplier equals which of the following?

• A. 1.5
• B. 1.0
• C. 2.0
• D. 0.5

Answer: (A)

The break-even multiplier tells you how much revenue per dollar of direct labor you must bill to cover all costs. To break even, total revenue must equal total costs, which are overhead plus direct salaries. Here that’s 60,000 + 120,000 = 180,000.

If you bill at a multiplier times direct salaries, revenue = multiplier × 120,000. Set this equal to total costs: multiplier × 120,000 = 180,000, so multiplier = 180,000 / 120,000 = 1.5.

So the break-even multiplier is 1.5. Values like 1.0 would cover only direct salaries, 2.0 would overshoot the break-even by a lot, and 0.5 would cover only overhead, not the salaries.