# Net multiplier formula

**URL:** <https://community.blackspectacles.com/t/net-multiplier-formula/5295>\
**Category:** Practice Management\
**Created:** [July 12, 2023, 7:02pm UTC](https://community.blackspectacles.com/t/net-multiplier-formula/5295 "2023-07-12T19:02:35Z")\
**Posts on this page:** 6\
**Page:** 1

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**Author:** ![ngolban](https://blackspectacles.com/uploads/images/20.png) [@ngolban](https://community.blackspectacles.com/u/ngolban)\
**Post date:** [July 12, 2023, 7:02pm UTC](https://community.blackspectacles.com/t/net-multiplier-formula/5295/1 "2023-07-12T19:02:35Z")

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@coachhayleypugh  
Which is correct:  
Net multiplier = breakeven rate / the inverse of target profit  
or  
Net multiplier = breakeven rate / the inverse of profit multiplier  
Both are not correct because my answers aren’t the same.

Appreciate your help!

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**Author:** ![ngolban](https://blackspectacles.com/uploads/images/20.png) [@ngolban](https://community.blackspectacles.com/u/ngolban)\
**Post date:** [July 12, 2023, 7:18pm UTC](https://community.blackspectacles.com/t/net-multiplier-formula/5295/2 "2023-07-12T19:18:20Z")

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or is it:  
Net multiplier = breakeven rate + profit multiplier

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**Author:** ![pants1234](https://blackspectacles.com/uploads/images/13.png) [@pants1234](https://community.blackspectacles.com/u/pants1234)\
**Post date:** [July 15, 2023, 7:36pm UTC](https://community.blackspectacles.com/t/net-multiplier-formula/5295/3 "2023-07-15T19:36:21Z")

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@coachhayleypugh @ngolban #practice-quiz #practice management  
I also have a question on net multiplier. One question on the PCM Quiz Break 6 asks to find the billing rate for an employee. To do this you have to find the Net Multiplier.

The correct answer is found with NM = Breakeven rate + Profit Multiplier. Using this formula the NM = 2.85 and the correct answer to the question is shown to be $120.89

However in the AHPP on page 410 it says the Net Multiplier = ratio of Net Operating Revenue to Total Direct Labor. If Net Multiplier is found this way the NM = 2.27 and the answer to the question would be $96.29, which is said to be incorrect.

I don’t understand why calculating the NM according to the AHPP formula returns an incorrect answer. What am I missing? Thanks for any clarification.

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**Author:** ![ngolban](https://blackspectacles.com/uploads/images/20.png) [@ngolban](https://community.blackspectacles.com/u/ngolban)\
**Post date:** [July 17, 2023, 5:38pm UTC](https://community.blackspectacles.com/t/net-multiplier-formula/5295/4 "2023-07-17T17:38:33Z")

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@coachhayleypugh  
@coachchrishopstock  
@coachkatebarbaria  
or anyone else…  
Could you please help us out?

Thank you!

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**Author:** ![johndburi](https://blackspectacles.com/uploads/images/12.png) [@johndburi](https://community.blackspectacles.com/u/johndburi)\
**Post date:** [August 15, 2023, 3:08am UTC](https://community.blackspectacles.com/t/net-multiplier-formula/5295/5 "2023-08-15T03:08:57Z")

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Same question as you had here. I bet the Quiz question is wrong since NM = direct labor + overhead rate + profit rate = NOR / total direct labor, the rate in the question is not matching.

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**Author:** ![coachhayleypugh](https://yyz1.discourse-cdn.com/flex029/user_avatar/community.blackspectacles.com/coachhayleypugh/32/1355_2.png) [@coachhayleypugh](https://community.blackspectacles.com/u/coachhayleypugh)\
**Post date:** [June 4, 2024, 9:32pm UTC](https://community.blackspectacles.com/t/net-multiplier-formula/5295/6 "2024-06-04T21:32:48Z")

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Woo! I took a hiatus as an instructor and am just now seeing this question. It’s a good one-- apologies it’s been so long for a reply.

If there’s a discrepancy on a question, please feel free to send me a direct message, since quiz question material can’t be shown in the forums. Always happy to help (now that I’m back)!