Why are some of the numbers in the PL Statement are in parentheses and some are not?
Where did the $72.00 number come from on calculating the Billable Rate for Principal A?
Thank You !
The new videos are coming out the day after my exam LOL - still good news (but bad timing for me, ha)
I think it’s easiest to think of the net multiplier as the sum of everything you need to pay (including profit!) divided by direct labor. This makes sense if you think about it in reverse - because you use that number to multiply by the hourly rate (which is just direct labor expressed hourly) to find a billable rate. The billable rate needs to be set so that you can pay for everything the firm needs to pay for.
So - net multiplier = (overhead rate) + (profit / direct labor)
or net multiplier = (break even rate) + (1.0) + (profit / direct labor)
That can also be written as:
(indirect expenses / direct labor) + (direct labor / direct labor) + (profit / direct labor)