Profit Plan Analysis
| A condensed statement of profit plan income and
expense is used to analyze the labor-related ratios and multipliers that are
the key indicators of financial performance.
Actual results of operations are compared to these values. |
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| The Annual column represents the profit
plan goals. The annual values
are subtotals from the profit plan line items. |
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| The Monthly column represents the
monthly objectives. The annual
values are divided by 12 monthly periods. |
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| The significant vales in the per direct hour
column are the average billing rate per hour of $88.94 in the
net revenue row and the average direct labor rate of $27.43 in
the direct labor row. |
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| The significant values in the Multiple of
Dir Labor column are the net multiplier of 3.241; the overhead
rate of 1.44 and operating profit multiplier of 0.80. The annual values are divided by direct
labor. |
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| The significant value in the Multiple of DPE
column is Multiple of Direct Personnel Expense of 2.32
calculated by dividing the benefits factor of 1.40 into the net
multiplier of 3.243 in the Multiple of Dir Labor column.
The benefits factor is calculated in the labor budget. |
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| The significant figures in the Percentage of
Net Revenue column shows that operating profit is 24. 79%
of net revenue and that total revenue is 157.41% of net
revenue. Direct labor is 30.84%
of net revenue. |
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| The break-even rate per hour is $66.89 and the
break-even multiplier is 2.44 (overhead rate of 1.44 + 1.00). |
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| Also shown is a percentage analysis of the
annual figures as a percentage of total revenue. Operating profit is 15.91% of total revenue
as compared to 24.81% of net revenue.
The percentage of net revenue is most meaningful when comparing firm
to firm and period to period. |
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| The annual plan for net revenue and operating
profit is divided by full-time-equivalents to get the values per FTE.
Calculate the values for total FTEs and technical only FTEs |
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| The annual plan for net revenue is divided by
total labor to calculate the profit plan revenue factor. |
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| Divide total labor by net revenue to calculate total
labor as a percentage of net revenue. |
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