As a Rule of Thumb, Consumer Debt as a Fixed

question 27

Multiple Choice

As a rule of thumb, consumer debt as a fixed percentage of monthly income based on experiences of financial planners is:

• A) No more than 5% to 10%
• B) Between 10% and 15%
• C) No more than 5%
• D) Between 10% and 20%
• E) None of the above

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Definitions:

Break-even Point

The level of production or sales at which total costs equal total revenues, resulting in no profit or loss.

Fixed Costs

Costs that are constant regardless of the volume of goods or services produced by a company, including lease payments and maintenance expenditures.

Variable Costs

Disbursements that are contingent upon the magnitude of production or sales transactions.

Contribution Margin

The amount by which the sale of a product or service exceeds its variable costs, contributing to covering fixed costs and generating profit.