Break-even rate is always equal to Overhead rate plus 1.0.

• A. Overhead rate - 0.5
• B. Overhead rate + 0.5
• C. Overhead rate + 1.0
• D. Overhead rate

Answer: (C)

In this context, the break-even rate must cover both the direct labor cost and the overhead that supports that work. To get it, multiply the base direct labor rate by (1 + overhead rate). That gives you a multiplier equal to overhead rate plus 1.0, which is why the break-even rate aligns with overhead rate plus 1.0.

For example, if the direct labor rate is $100 per hour and overhead is 40% (0.40), the break-even rate is $100 × 1.40 = $140 per hour. The factor 1.40 is the overhead rate plus 1.0. The other options miss the proper relationship: subtracting or adding the wrong amount would not guarantee costs are fully covered, and using only the overhead rate ignores the direct labor cost.