Finance Question - net multiplier

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Ye Xiao

November 15, 2023 00:17

I'm having trouble understanding why the net multiplier is calculated this way. I thought net multiplier=NOR/Total Direct Labor. Wouldn't it be 800,000/352,000=2.27? But when it's calculated this way the net multiplier is smaller than the break-even rate (overhead rate+1=2.35), which conflicts with the 22% profit.
I also calculated the net multiplier with the equation: net multiplier=break-even rate/inverse of profit, which gives 2.35/0.78=3.01.
Why is each method giving me a different number? Am I missing something? Also, does anyone know where this equation (net multiplier=break-even rate + profit multiplier) or the term profit multiplier live on AHPP?
Thank you!

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  Michael Ermann November 15, 2023 11:58

  I don’t think it’s you…this question looks to me to be wrong in a few places….the good news is if you can CORRECTLY identify bad questions…I’ve found those people are ready for the exam. Hope you have it scheduled for sometime soon!

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