Resolve the following breakeven questions using Table 6.1 There are an unlimited amount of questions and exercises that can be based on this table and analysis:

Table 6.1

 

a. What is the breakeven revenue based on $75 million of construction cost?

b. Based on a revised negotiated profit of 5% and $75 million in construction cost, what is the total revenue?

c. If a small contractor had an annual volume of $5 million and $4.5 million of that was construction cost, what would be its profit margin in percentage?

d. If a large contractor had an annual volume of $532 million, and it desired a net pre-tax profit of 5%, how much fee in percentage and construction cost would it need to support that goal?

e. Assuming a contractor could lock in on a fee (any % would do), other than cutting construction cost, and using only information you can garner from this table, how can it maximize its net profit percentage?

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Table 6.1 Breakeven analysis Breakeven Revenue Without Profit Total HOOH Total HOOH % of Cost $0 $50,000 $52,000 52.0% $2,000 $10,000 $110,000 22.0% $120,000 12.0% $140,000 7.0% $20,000 $40,000 $200,000 $450,000 4.5% $1,000,000 $1,650,000 3.3% $2,000,000 $3,000,000 3.0% $10,000,000 $12,000,000 2.4% $20,000,000 $23,000,000 2.3% Ideal Revenue Construction Stepped Cost Fixed OH Variable Variable OH % HOOH $50,000 $50,000 $0 $50,000 2.0% $156,000 $152,000 $100,000 $50,000 2.0% $630,000 $610,000 $500,000 $100,000 2.0% $1,160,000 $1,120,000 $1,000,000 $100,000 2.0% $2,220,000 $2,140,000 $100,000 2.0% $2,000,000 $10,850,000 $10,450,000 $10,000,000 $250,000 2.0% $53,650,000 $51,650,000 $50,000,000 $650,000 2.0% $107,000,000 $103,000,000 $100,000,000 $1,000,000 2.0% $532,000,000 $512,000,000 $500,000,000 $2,000,000 2.0% $1,063,000,000 $1,023,000,000 $1,000,000,000 $3,000,000 2.0% Ideal Profit as Fee, or % of Cost OH&P 4.0% 4.0% $0 56.0% $4,000 4.0% 26.0% $20,000 4.0% 16.0% $40,000 4.0% 11.0% $80,000 4.0% 8.5% $400,000 4.0% 7.3% $2,000,000 4.0% 7.0% $4,000,000 4.0% 6.4% $20,000,000 4.0% 6.3% $40,000,000 Ideal Net (Before Tax) Profit