Profit Plan - Bottom Section Table 7.13

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Ngawang Tseten

March 26, 2024 08:08

On page 443 there is scenario noted, but I do not follow on how the "$8.69 to $24.05" extrapolated. Could not back-track the math. I was hoping someone here(on the forum) knew of the proof-of-work break down.  

"If the $76.31 were rounded up to an hourly billing rate of $85.00, the profit would be increased by $8.69 to $24.05, for a profit percentage of 28.29 percent. Conversely, if the principal’s rates were rounded down, the fi rm’s net profit percentage could be increased considerably without any additional cost to the fi rm or loss of competitive edge" Page 443. Ed.15 of Handbook

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  Jason Ma April 10, 2024 15:37 (Edited April 10, 2024 16:23)

   

  Hourly Salary: $24.38
  Net Multiplier: 3.13
  

  Hourly Billing Rate = Hourly Salary × Net Multiplier Hourly Billing Rate = $24.38 × 3.13 = $76.31

  If rounded up to $85.00:
  Profit Increase = Rounded Hourly Billing Rate - Original Hourly Billing Rate Profit Increase
  = $85.00 - $76.31 = $8.69

  New Profit = Original Profit + Profit Increase New Profit
  = $15.36 + $8.69 = $24.05

  Profit Percentage = (New Profit / Total Revenue) * 100% Profit Percentage
  = ($24.05 / $85.00) * 100% ≈ 28.29%

   

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  Courtney Prather April 23, 2024 17:42

  Maybe I am missing information from the handbook, but where did you get the hourly salary and net multiplier and original profit?

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  Jason Ma April 24, 2024 13:44

  Hi Courtney, Its on page 443 of the Architect's Handbook of Professional Practice.
  (read the paragraph on page)
  
  "Example (from the profit plan) using the data for employee T. Rex (Table 7.13):
  Hourly Salary ($24.38) × Net Multiplier (3.13) = Hourly Billing Rate ($76.31)"

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