What is the ATR on a $10,000, one-year, recurring-revenue contract?

Question

Options

• A$10,000
• B10% of $10,000
• C$10,000 divided by 12
• D$1,200

• A
  90% (19)
• B
  5% (1)
• C
  5% (1)

Explanation

ATR (Annual Total Revenue) on a one-year contract equals the full contract value - $10,000 - because the entire contract period is one year, so the annual revenue is the total revenue. No further calculation is needed.

Why the distractors are wrong:

• B (10% of $10,000 = $1,000): 10% is unrelated to ATR; it resembles a commission rate, not a revenue figure.
• C ($10,000 ÷ 12 ≈ $833): Dividing by 12 gives MRR (Monthly Recurring Revenue), not ATR - a common mix-up.
• D ($1,200): This implies $100/month × 12, which doesn't correspond to any standard calculation from a $10,000 contract.

Memory tip: Think "Annual = one year." If the contract is already one year long, ATR = the contract value. Only reach for division (÷ 12) when converting annual to monthly (MRR). If the duration were shorter - say, a 6-month $10,000 contract - you'd annualize it ($20,000 ATR), but a 12-month contract needs no adjustment.

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