Bluestone, a landscaping company with 2022 losses, needs to determine additional snow removal revenue required to break even. Using exhibit data showing three business lines (landscape maintenance at -10% margin, snow removal at 40% margin, and development services at 10% margin) with revenues of $300M, $40M, and $60M respectively, candidates must calculate total losses and divide by snow removal’s contribution margin to find the $20M revenue increase needed.
Key Insights:
- Break-even analysis requires summing all losses across business segments: ($30M) + $16M + $6M = ($8M) total loss
- The answer is derived by dividing total loss by contribution margin: $8M ÷ 40% = $20M additional revenue needed
- Snow removal’s 40% margin is exceptionally high for a commoditized service, suggesting either market urgency pricing power or Bluestone’s competitive advantage; this context elevates candidate analysis quality
- The core landscape maintenance business operates at negative margins, indicating structural profitability challenges distinct from the snow removal opportunity