Projected Billing question

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Christopher Boucher

January 28, 2021 13:05

This is from Hyperfine Architecture.

Let's say Sandra's Utilization Rate gets reduced from 70% to 65%. How do I reflect/calculate this change in the Billing Rate and Projected Billing columns?

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  Valerie Galchenko January 28, 2021 15:36

  Hourly rate = 32.75 x 52 x 40 = $68,120.00  = 100% 

  Utilization rate = 75%:

  Total labor: $68,120.00

  Direct labor: $68,120.00 x 0.75= $51,090  

  Indirect labor: $68,120 – 51,090 = $17,030

  Projected billing: $163,488

   

  Utilization rate = 65%:

  Total labor: $68,120.00

  Direct labor: $68,120.00 x 0.65 = $44,278

  Indirect labor: $68,120 – 44,278 = $23,842

  Projected billing: $141,690

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  Christopher Boucher January 28, 2021 15:52

  Thanks, Valerie. So I'm clear, the Billing Rate wouldn't change since we don't know what the multiplier is?

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  Valerie Galchenko January 28, 2021 16:02 (Edited January 28, 2021 16:14)

  Net multiplier is the ratio of net operating revenue (NOR) to total direct labor:

  113,568 / 35,490 = 3.2

  210,912 / 65,910 = 3.2

  123,189 / 38,497 = 3.2

  134,687 / 42,090 = 3.2

  Net multiplier is 3.2 and it's a constant uniform number. 

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  Christopher Boucher January 28, 2021 16:19

  Thanks, Valerie!

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  Christopher Boucher January 28, 2021 17:31

  1) 2080*.75 = 1560 chargeable hours
  2) 75000 direct salary /.75 = $100000 is the employees salary

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  Christopher Boucher January 28, 2021 17:32

  100000/2080 = $48 is the hourly rate for the employee

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  David Gaied January 28, 2021 17:57

  Valerie,

  Could you please explain how did you get the projected billing?

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  Christopher Boucher January 28, 2021 18:57

  According to AHPP, projected billing is found by multiplying the Hourly Billing Rate x (2080 hrs/year x utilization rate)

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  Christopher Boucher January 28, 2021 19:52

  When I plug the numbers in to the aforementioned formula, I get different answers. Yes, Valerie, please explain how you got the projected billing.

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  David Gaied January 28, 2021 21:06

  2080 x 0.75 = 1560hr

  1560 x 105 = 163,800 

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  Valerie Galchenko January 28, 2021 23:26

  Sandra's hourly rate: $32.75

  Net multiplier: 3.2 (a constant number) 

  32.75 x 3.2 = $104.80 (billing rate) 

  $104.80 x 2,080 x 0.75 = $163,488 

  $105.00 x 2,080 x 0.75 = $163,800 

  $163,800 - $163,488 = $312.00 

  There's $312.00 difference because Hyperfine used different net multiplier number for Sandra's calculations (not a constant of 3.2). 

  Net multiplier for Sandra:

  105.00 / 32.75 = 3.2061068702 

  0.20 x 2,080 x 0.75 = $312.00 

   

   

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  KH February 25, 2021 02:39

  Thank you Valerie! This was so helpful.

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  Sarah Al-Tekreeti December 18, 2022 04:43

  Where did the 3.2 net multiplier come from? Isn’t Net Multiplier = base labor/direct labor? I’m getting 1.4

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