Operating Profit Multiplier

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The operating profit target multiple is a component of the net multiplier. The profit plan operating profit target is measured as a multiple of direct labor and as a percentage of net revenue. The multiple is calculated by dividing the operating profit target by the budget direct labor dollars. A multiple of .50 means that for each $1.00 of direct labor spent on projects, $0.50 is budgeted for profit before profit sharing distribution and taxes. The profit multiplier is used to estimate the profit for fixed-fee projects based on direct labor dollars. For example, a project budget with $1,000 of direct labor expense would have $500 of profit built into the fixed-fee.

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