Net multiplier, when calculated, gives the ratio of net revenue to what cost?

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

Answer: (A)

This is about how net multiplier translates the cost of direct labor into the revenue you bill to a client. The net multiplier is calculated by dividing net revenue (the amount billed to the client, which includes overhead and profit wrapped into the fee) by the cost of direct labor. In other words, it shows how many dollars of net revenue you get for every dollar of direct labor cost. The direct labor cost is the base that the multiplier applies to, while overhead, indirect costs, and profit are already reflected in the net revenue portion. So the ratio compares net revenue to the cost of direct labor.