Click on the Exercise 3 tab and complete. Record your answers below and provide a explanation on your method and what your outcome tells you.
1. Discuss the relationship between Utilization Rate, Direct Labor, and Indirect Labor and their potential impact to the success (re: profitabiliy) of a company.
2. Design Professional Firms create project and business budgets based upon a Labor Multiplier Factor. Taking into account that information:
a. What would expect your annual salary to be upon graduation? Convert that salary into an hourly rate (base on 2080 work hours annually)
b. Now, what do you believe is a reasonable hourly rate at which your company will charge for your services, i.e. what rate (dollars) will the company bill out your services at?
c. What factors did you consider/take into account when you determined your billing rate?
3. What do you believe is a reasonable availability or utilization rate (the percentage of your time that is charged to billable projects) is for a staff engineer one month after the engineer starts working for the company after just graduating from college?
a. 6 Months? b 1 Year?. c. Explain the reasoning for your responses
5. If the Breakeven Multiplier is used to determine the multiple of direct labor dollars a company needs to take in (i.e., Revenue) to break even (no profit, did not lose money), what is the difference between the Breakeven Multiplier and Labor Multiplier Factor (also known as the Target Multiplier)?
6. Download the Sample P&L spreadsheet. a. Click on the Exercise 1 tab and complete exercises 1A, and 1B. Record
your answers below and provide a explanation on your method (Hint: this is based on calculating the Breakeven Multiplier and using that multiplier to calculate the billing rate).
1. Gross Revenue and Breakeven Labor Multiplier for Exercise 1A: 2. Gross Revenue and Breakeven Labor Multiplier for Exercise 1B:
b. Click on the Exercise 2 tab and complete. Record your answers below and provide a explanation on your method and what your outcome tells you.
1. Utilization Rate for Staff Engineers and CAD Operator, Earnings before taxes, Gross Profit, and Average Labor Multiplier for Exercise 2
c. Click on the Exercise 3 tab and complete. Record your answers below and provide a explanation on your method and what your outcome tells you.
1. Show Utilization Rate for all positions. Write down Gross Profit, and Average Labor Multiplier for Exercise 3