(DS) Profit Plan

Question 1

Profit Plan

Answer 1

Document used to determine what is financially possible the coming year. Considers the current year’s revenue, backlog, and known future events. Used to develop projections for revenue, direct labor, indirect labor, indirect expenses

Question 2

Revenue

Answer 2

Income before expenses are taken into account

Use salaries, utilization rates, and the target multiplierto set typical dilling rates

Question 3

Direct Labor

Answer 3

Labor involving production of services and is billed to a project. Use salaries and the target utilization rate to project direct labor expenses

Question 4

Indirect Labor

Answer 4

Labor NOT involved in the production of services
Uses salaries and target utilization rat to project indirect labor expenses
EXAMPLE?

Question 5

Indirect Expenses

Answer 5

Expenses that are incurred to operate the cost of the business and are not associated with a specific project

• Difficult to estimate
• Typically 48-52% of Net Operating Revenue

Question 6

Profit and Loss Statement

Answer 6

Lists the income and expenses of a business for a period of time, typically monthly or yearly

Question 7

Mattox Format

Answer 7

Unique format for easy understanding of firm financial health

Question 8

Annual Budgets

Answer 8

An expanded version of Profit and lost statements

Question 9

Net Operating Revenue

Answer 9

Sum of fees billed, reimbursable expenses biled, outside consultant fees, project related expenses

Question 10

Fixed Expanses

Answer 10

Sum of direct and indirct labor, payroll benefits, office lease, office, expenses, business insurance, taxes

Question 11

Variable Expenses

Answer 11

Remaining indirect expenses that vary year to year
-Difficult to estimate
take average of the last three years for each line item if possible
Includes reimbursement, equipment, marketing,etc.

Question 12

Miscellaneous Revenue and Expenses

Answer 12

Line items related to daily operations and interest earned among other miscellaneous items