Calc'ing profift  what's the right way.
So in my study travels, I keep seeing conflicting information on the appropriate equation for calc'ing profit. In Plural sight, they state very clearly that their info is coming from AHHP which says to take your salary rate, add it to your indirect expense and then DIVIDE that number by .75 if looking for a 25% profit.
But the 14th edition of the AHPP shows all of their equations with a MULTIPLY of .25 for the 25% profit. Shichff Harden lecture also says the same thing.
What's the right way to do it??

Hi John,
Read the AHPP 15th edition just to be sure. It explains everything the right way.
The actual formula to calculate the Targeted Net Profit Multiplier is as follows:
If your Targeted Net profit is 25% then:
Break Even Multiplier / 0.75  Break Even Multiplier
Lets imagine that your BE Multiplier is 2.50 then:
2.50 / 0.75  2.50 = 0.83
I hope my answer helps.

Hey John,
Fernando is right. The issue is PROFIT vs MARKUP.
Markup you just add 25% or whatever the desired value is. Profit you divide by .75 to get a 25% profit after you subtract the cost of services from the final sales price. More info on both of these here, scroll down to the discussion about Assignment 14: https://hyperfinearchitecture.com/pcmstudy
I think on the ARE you won't have to blindly make that distinction...they will say something like, add a 10% markup to account for the contractor's profit. So by the book that profit might be less than 10% but the point is you're accounting for the gc to make some money.

John,
I agree with answers above. I would also advise you to always check your math by going backwards.
For instance, your breakeven is $100. If you want to charge 20% for profit, you will go:
$100/0.8 = $125 (this is breakeven PLUS profit)
Profit = $125  $100
Profit = $25
Going backwards to check your percentage:
($25/$125) x 100% = 0.2 x 100% = 20%
If we were to use the other method, this is what you would get:
$100 x 0.2 = $20 ("profit" only)
Total (breakeven + profit) = $100 + $20 = $120
However, when you check this method in reverse:
($20/$120) x 100% = 16.7%
Conclusion is, to calculate profit for certain percentage, you multiply the number by ((100  profit percentage)/100)
Hope this helps
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