Calculating Billing Rate with Profit

Hi All,

We had a question come up in our workshop yesterday (4/17/2022) about calculating billable rate with a specified desired profit. The practice question referenced was:

Please review the steps in this question. Can you use multiplication and addition instead of dividing by the complement of the desired profit?

The previous post below addresses this.
PCM Practice Exam Question (from Form3)

I would also recommend that you check out pages 440-443 in AHPP. There is a helpful breakdown with sample calculations!

In the question, to break even the firm would need to charge $64.40 per hour for the employee. If they charged $74 (which is found by multiplying by .15 then adding that amount) they are only increasing their profit by 13% which would not satisfy the 15% requirement. Page 442 of AHPP has a sample breakdown of this as well.

Hope this helps!