Determine your Utilization Rates to achieve a labor multiplier
that will yield a Gross Profit of 400,000 for the upcoming business year
+ The utilization rates will be the same for each job classification, understand the higher the position, the lower the utilization rate. Utilization rates for Principal and non-production staff are already set.
+ The hourly rates are set based on your current contracts
+ Look at the earnings before taxes before you start and determine your break even multiplier, then add in the profit to detemine your target multiplier. Use this information to assist you in determining how much revenue each job classification must generate to meet your target Gross Profit
+ Adjust the utilization rates until you reach the target Gross Profit
+ Write down your gross revenue and your Average Labor multiplier
+ Show Utilization Rate for all positions. Write down Gross Profit, and Average Labor Multiplier for Exercise 3.
Use the following information for the solution
Labor Costs Title / Job Annual Hrly Total % Direct Indirect Billing Labor Name Classification Salary($) Salary Hours Utilization Hours Hours Direct Indirect Rate Multiplier Gross Rev Maria Principal $150,000 72 2,080 40% 832 1,248 $60,000 $90.000 185 2.57 153,920 Harry Project Manager $125,000 60 2,080 0% 0 2,080 $0 $125,000 175 2.91 0 Natalie Project Manager $115,000 55 2,080 0% 0 2.080 $0 $115,000 175 3.17 0 Yousef $101,000 19 49 Project Engineer 2,080 no % co 0 2,080 0 $0 $101,000 155 155 3.19 0 Nicole $95,000 Project Engineer 46 2,080 0% 0 2,080 SO $0 $95,000 1551 155 3.39 0 David $90,000 no 43 Project Engineer 2,080 0% co 0 2,080 $0 $90,000 155 3.58 0 Jonathon Staff Engineer $79,500 29 no/ 201 38 2,080 0% 440 co 0 2.080 $0 $79,500! 115 3.01 0 27 Alberto $76,000 no/ Staff Engineer 40 37 2,080 0% co 0 2,080 $0 4151 $76,000 115 3.15 0 26 / $74,300 36 Sandy Staff Engineer co 0% 22 4151 0 2.080 2,080 $0 $74,300 115 3.221 0 Rebecca Staff Engineer 21 00 $67,000 32 2,080 0% 0% 0 2,080 co $0 $67,000 115 3.57 0 Jennifer Staff Engineer $64,000 21 31 2,080 noz 0% ni co 2,080 UI 115 JU $64,000 115 3.74 0 Kit Staff Engineer $60,000 29 co 2,080 0% 0 2,080 $0 $60,000 1151 1151 3.99 0 CAD Operator Fran $50,000 21 24 2,080 % 0% 0 2,080 $0 $50,000 93 95 3.95 0 Gaspar Admin Asst $45,000 22 2,080 25% 520 1,560 $11,250 $33.750 75 3.47 39,000 Pat Executive Assistar $60,000 29| 2,080 25% 520 1,560 $15,000 $45,000 75 2.60 co 39,000 Beth Controller $80,000 38 2,080 0% 0 2,080 $0 $80,000 0 0.00 0 $1,331,800 33,280 1,872 31,408 $86,250, 51,245,550 Total Labor Revenue 231,920 Other Revenue 0 Exercise 3: Determine your Utilization Rates to achieve a labor multiplier that will yield a Gross Profit of 400,000 for the upcoming business year Total Gross Revenue 231,920 + The utilization rates will be the same for each job classification, understand the higher the position, the lower the utilization rate. Utilization rates for Principal and non- Direct Expenses production staff are already set. Labor $86,250 + The hourly rates are set based on your current contracts Other $45,000 + Look at the earnings before taxes before you start and determine your break even multiplier, then add in the profit to detemine your target multiplier. Use this information to Subtotal $131,250 assist you in determining how much revenue each job classification must generate to meet your target Gross Profit Indirect Expenses + Adjust the utilization rates until you reach the target Gross Profit Labor $1,245,550 + Write down your gross revenue and your Average Labor multiplier Labor Burden $332,950 G&A $998,850 Subtotal $2,577,350 Total Expenses $2,708,600 Earnings before taxes $2,476,680 -1067.9% Gross Profit % Average Labor Multiplier 2.69 Labor Costs Title / Job Annual Hrly Total % Direct Indirect Billing Labor Name Classification Salary($) Salary Hours Utilization Hours Hours Direct Indirect Rate Multiplier Gross Rev Maria Principal $150,000 72 2,080 40% 832 1,248 $60,000 $90.000 185 2.57 153,920 Harry Project Manager $125,000 60 2,080 0% 0 2,080 $0 $125,000 175 2.91 0 Natalie Project Manager $115,000 55 2,080 0% 0 2.080 $0 $115,000 175 3.17 0 Yousef $101,000 19 49 Project Engineer 2,080 no % co 0 2,080 0 $0 $101,000 155 155 3.19 0 Nicole $95,000 Project Engineer 46 2,080 0% 0 2,080 SO $0 $95,000 1551 155 3.39 0 David $90,000 no 43 Project Engineer 2,080 0% co 0 2,080 $0 $90,000 155 3.58 0 Jonathon Staff Engineer $79,500 29 no/ 201 38 2,080 0% 440 co 0 2.080 $0 $79,500! 115 3.01 0 27 Alberto $76,000 no/ Staff Engineer 40 37 2,080 0% co 0 2,080 $0 4151 $76,000 115 3.15 0 26 / $74,300 36 Sandy Staff Engineer co 0% 22 4151 0 2.080 2,080 $0 $74,300 115 3.221 0 Rebecca Staff Engineer 21 00 $67,000 32 2,080 0% 0% 0 2,080 co $0 $67,000 115 3.57 0 Jennifer Staff Engineer $64,000 21 31 2,080 noz 0% ni co 2,080 UI 115 JU $64,000 115 3.74 0 Kit Staff Engineer $60,000 29 co 2,080 0% 0 2,080 $0 $60,000 1151 1151 3.99 0 CAD Operator Fran $50,000 21 24 2,080 % 0% 0 2,080 $0 $50,000 93 95 3.95 0 Gaspar Admin Asst $45,000 22 2,080 25% 520 1,560 $11,250 $33.750 75 3.47 39,000 Pat Executive Assistar $60,000 29| 2,080 25% 520 1,560 $15,000 $45,000 75 2.60 co 39,000 Beth Controller $80,000 38 2,080 0% 0 2,080 $0 $80,000 0 0.00 0 $1,331,800 33,280 1,872 31,408 $86,250, 51,245,550 Total Labor Revenue 231,920 Other Revenue 0 Exercise 3: Determine your Utilization Rates to achieve a labor multiplier that will yield a Gross Profit of 400,000 for the upcoming business year Total Gross Revenue 231,920 + The utilization rates will be the same for each job classification, understand the higher the position, the lower the utilization rate. Utilization rates for Principal and non- Direct Expenses production staff are already set. Labor $86,250 + The hourly rates are set based on your current contracts Other $45,000 + Look at the earnings before taxes before you start and determine your break even multiplier, then add in the profit to detemine your target multiplier. Use this information to Subtotal $131,250 assist you in determining how much revenue each job classification must generate to meet your target Gross Profit Indirect Expenses + Adjust the utilization rates until you reach the target Gross Profit Labor $1,245,550 + Write down your gross revenue and your Average Labor multiplier Labor Burden $332,950 G&A $998,850 Subtotal $2,577,350 Total Expenses $2,708,600 Earnings before taxes $2,476,680 -1067.9% Gross Profit % Average Labor Multiplier 2.69
