Net multiplier is calculated by dividing net revenue by which cost?

• A. Cost of direct labor.
• B. Indirect labor.
• C. Overhead.
• D. Profit.

Answer: (A)

Net multiplier shows how much net revenue you generate from each dollar of direct labor cost. It is calculated by dividing net revenue by the cost of direct labor, because direct labor is the primary driver of the project’s effort and the basis for billing. For example, if net revenue is $180,000 and direct labor cost is $72,000, the net multiplier is 2.5, meaning every dollar of direct labor yields $2.50 in net revenue. Indirect labor, overhead, or profit aren’t used as the divisor because they are components that are already absorbed into the net revenue figure, not the base you scale from.