Customer A purchased a one-year WebEx contract of 100 seats at $10 per seat. Customer B purchases a three-year WebEx contract of 100 seats at $10 per seat. What is the annual recurring revenue (ARR)…

Question

Options

• A$1000 and $3000
• B$1100 and $3300
• C$1000 and $1000
• D$3000 and $3000

• A
  6% (2)
• B
  11% (4)
• C
  80% (28)
• D
  3% (1)

Explanation

Option C is correct because ARR measures the annualized value of recurring revenue - it normalizes any contract to what it's worth per year. Both customers pay 100 seats × $10 = $1,000 per year, making their ARR identical regardless of contract length.

Why the distractors fail:

• A ($1,000 and $3,000) confuses ARR with TCV (Total Contract Value) for Customer B - multiplying the annual value by the number of years gives total revenue, not annual recurring revenue.
• B ($1,100 and $3,300) introduces a 10% markup that has no basis in the problem; it likely trips up test-takers who second-guess the straightforward math.
• D ($3,000 and $3,000) applies the multi-year multiplication error to both customers, compounding the same misunderstanding.

Memory tip: Lock onto the "A" in ARR - it stands for Annual. No matter how long the contract runs, always ask "what does this customer pay in one year?" That single-year number is the ARR.

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