Profit and Loss Statement

Example

EGR/BUS 445: Sample Profit & Loss Statement

Labor Costs

Name Title Annual Salary ($) Hrly Salary Total Hours % Utilization Direct Hours Indirect Hours Direct Indirect Hourly Rate Labor Multiplier Gross Rev

Maria Principal $175,000 84 2,080 25% 520 1,560 $43,750 $131,250 190 2.26 98,800

Harry Project Manager $135,000 65 2,080 75% 1,560 520 $101,250 $33,750 150 2.31 234,000

Yousef Project Engineer $115,000 55 2,080 80% 1,664 416 $92,000 $23,000 145 2.62 241,280

Nicole Project Engineer $102,000 49 2,080 80% 1,664 416 $81,600 $20,400 145 2.96 241,280

Jonathon Staff Engineer $75,000 36 2,080 90% 1,872 208 $67,500 $7,500 125 3.47 234,000

Sandy Staff Engineer $71,000 34 2,080 90% 1,872 208 $63,900 $7,100 125 3.66 234,000

Rebecca Staff Engineer $67,000 32 2,080 90% 1,872 208 $60,300 $6,700 125 3.88 234,000

Kit Staff Engineer $60,000 29 2,080 90% 1,872 208 $54,000 $6,000 125 4.33 234,000

Fran CAD Operator $50,000 24 2,080 90% 1,872 208 $45,000 $5,000 100 4.16 187,200

Gaspar Admin Asst $35,000 17 2,080 50% 1,040 1,040 $17,500 $17,500 75 4.46 78,000

Beth Accountant $55,000 26 2,080 0% 0 2,080 $0 $55,000 100 3.78 0

$940,000 22,880 15,808 7,072 $626,800 $313,200 Total Labor Revenue 2,016,560

Other Revenue 34,000

Total Gross Revenue 2,050,560

Direct Expenses

Labor $626,800

Other $5,500

Subtotal $632,300

Indirect Expenses

Labor $313,200

Labor Burden $235,000

G&A $470,100

Subtotal $1,018,300

Total Expenses $1,650,600

Earnings before taxes $399,960

Gross Profit % 19.50%

Average Labor Multiplier 3.22

Break Even Multiplier 2.63

Exercise 1A

EGR/BUS 445: Sample Profit & Loss Statement

Labor Costs

Name Title Annual Salary ($) Hrly Salary Total Hours % Utilization Direct Hours Indirect Hours Direct Indirect Hourly Billing Rate Labor Multiplier Gross Rev

Maria Principal $170,000 82 2,080 50% 1,040 1,040 $85,000 $85,000 0 0.00 0

Harry Project Manager $140,000 67 2,080 80% 1,664 416 $112,000 $28,000 0 0.00 0

Yousef Project Engineer $104,000 50 2,080 85% 1,768 312 $88,400 $15,600 0 0.00 0

Nicole Project Engineer $96,000 46 2,080 85% 1,768 312 $81,600 $14,400 0 0.00 0

David Project Engineer $88,000 42 2,080 85% 1,768 312 $74,800 $13,200 0 0.00 0

Jonathon Staff Engineer $79,500 38 2,080 90% 1,872 208 $71,550 $7,950 0 0.00 0

Sandy Staff Engineer $74,300 36 2,080 90% 1,872 208 $66,870 $7,430 0 0.00 0

Rebecca Staff Engineer $67,000 32 2,080 90% 1,872 208 $60,300 $6,700 0 0.00 0

Jennifer Staff Engineer $64,000 31 2,080 90% 1,872 208 $57,600 $6,400 0 0.00 0

Kit Staff Engineer $60,000 29 2,080 90% 1,872 208 $54,000 $6,000 0 0.00 0

Fran CAD Operator $50,000 24 2,080 90% 1,872 208 $45,000 $5,000 0 0.00 0

Gaspar Admin Asst $45,000 22 2,080 25% 520 1,560 $11,250 $33,750 0 0.00 0

Pat Executive Assistant $60,000 29 2,080 25% 520 1,560 $15,000 $45,000 0 0.00 0

Beth Controller $80,000 38 2,080 0% 0 2,080 $0 $80,000 0 0.00 0

$1,177,800 29,120 20,280 8,840 $823,370 $354,430 Total Labor Revenue 0

Other Revenue 60,000

Total Gross Revenue 60,000

Direct Expenses

Labor $823,370

Other $45,000

Subtotal $868,370

Indirect Expenses

Labor $354,430

Labor Burden $353,340

G&A $600,000

Subtotal $1,307,770

Total Expenses $2,176,140

Earnings before taxes -$2,116,140

Gross Profit % -3526.9%

Average Labor Multiplier 0.00

Exercise 1: Determine your breakeven labor multiplier
A)
+ Assume the utilization rates do not changes
+ For each employee enter an hourly rate
+ Look at the hourly salary as a starting point
+ Adjust the hourly rates until you reach the break even point
(zero earnings before taxes ± $2000)
+ Write down your gross revenue and your breakeven labor multiplier for Case A

Note:
The billing rate for each title classification should be the same for the entire classification (All Staff Engineers should have the same hourly billing rate, All Project Engineers should have the same hourly billing rate, etc.).

Exercise 1B

EGR/BUS 445: Sample Profit & Loss Statement

Labor Costs

Name Title Annual Salary ($) Hrly Salary Total Hours % Utilization Direct Hours Indirect Hours Direct Indirect Hourly Billing Rate Labor Multiplier Gross Rev

Maria Principal $170,000 82 2,080 50% 1,040 1,040 $85,000 $85,000 0 0.00 0

Harry Project Manager $140,000 67 2,080 80% 1,664 416 $112,000 $28,000 0 0.00 0

Yousef Project Engineer $104,000 50 2,080 85% 1,768 312 $88,400 $15,600 0 0.00 0

Nicole Project Engineer $96,000 46 2,080 85% 1,768 312 $81,600 $14,400 0 0.00 0

David Project Engineer $88,000 42 2,080 85% 1,768 312 $74,800 $13,200 0 0.00 0

Jonathon Staff Engineer $79,500 38 2,080 100% 2,080 0 $79,500 $0 0 0.00 0

Sandy Staff Engineer $74,300 36 2,080 100% 2,080 0 $74,300 $0 0 0.00 0

Rebecca Staff Engineer $67,000 32 2,080 100% 2,080 0 $67,000 $0 0 0.00 0

Jennifer Staff Engineer $64,000 31 2,080 100% 2,080 0 $64,000 $0 0 0.00 0

Kit Staff Engineer $60,000 29 2,080 100% 2,080 0 $60,000 $0 0 0.00 0

Fran CAD Operator $50,000 24 2,080 100% 2,080 0 $50,000 $0 0 0.00 0

Gaspar Admin Asst $45,000 22 2,080 25% 520 1,560 $11,250 $33,750 0 0.00 0

Pat Executive Assistant $60,000 29 2,080 25% 520 1,560 $15,000 $45,000 0 0.00 0

Beth Controller $80,000 38 2,080 0% 0 2,080 $0 $80,000 0 0.00 0

$1,177,800 29,120 21,528 7,592 $862,850 $314,950 Total Labor Revenue 0

Other Revenue 60,000

Total Gross Revenue 60,000

Direct Expenses

Labor $862,850

Other $45,000

Subtotal $907,850

Indirect Expenses

Labor $314,950

Labor Burden $353,340

G&A $600,000

Subtotal $1,268,290

Total Expenses $2,176,140

Earnings before taxes -$2,116,140

Gross Profit % -3526.9%

Average Labor Multiplier 0.00

Exercise 1: Determine your breakeven labor multiplier
B)
+ Increase the utilization of the staff engineers and CAD operator to 100%
+ Adjust the hourly rates until you reach the break even point
(zero earnings before taxes ± $2000)
+ Note the differences between this and previous calculations
+ Write down your gross revenue and your breakeven labor multiplier for Case B

Note:
The billing rate for each title classification should be the same for the entire classification (All Staff Engineers should have the same hourly billing rate, All Project Engineers should have the same hourly billing rate, etc.).
185

Exercise 2

EGR/BUS 445: Sample Profit & Loss Statement

Labor Costs

Name Title Annual Salary ($) Hrly Salary Total Hours % Utilization Direct Hours Indirect Hours Direct Indirect Hourly Rate Labor Multiplier Gross Rev

Maria Principal $175,000 84 2,080 30% 624 1,456 $52,500 $122,500 205 2.44 127,920

Harry Project Manager $145,000 70 2,080 75% 1,560 520 $108,750 $36,250 185 2.65 288,600

Yousef Project Engineer $108,000 52 2,080 80% 1,664 416 $86,400 $21,600 165 3.18 274,560

Nicole Project Engineer $98,000 47 2,080 80% 1,664 416 $78,400 $19,600 165 3.50 274,560

David Project Engineer $94,000 45 2,080 80% 1,664 416 $75,200 $18,800 165 3.65 274,560

Jonathon Staff Engineer $78,000 38 2,080 88% 1,830 250 $68,640 $9,360 125 3.33 228,800

Sandy Staff Engineer $71,000 34 2,080 88% 1,830 250 $62,480 $8,520 125 3.66 228,800

Rebecca Staff Engineer $67,000 32 2,080 88% 1,830 250 $58,960 $8,040 125 3.88 228,800

Jennifer Staff Engineer $64,000 31 2,080 88% 1,830 250 $56,320 $7,680 125 4.06 228,800

Kit Staff Engineer $60,000 29 2,080 88% 1,830 250 $52,800 $7,200 125 4.33 228,800

Fran CAD Operator $50,000 24 2,080 88% 1,830 250 $44,000 $6,000 100 4.16 183,040

Gaspar Admin Asst $45,000 22 2,080 25% 520 1,560 $11,250 $33,750 60 2.77 31,200

Pat Executive Assistant $60,000 29 2,080 25% 520 1,560 $15,000 $45,000 60 2.08 31,200

Beth Accountant $80,000 38 2,080 0% 0 2,080 $0 $80,000 60 1.56 0

$1,195,000 29,120 19,198 9,922 $770,700 $424,300 Total Labor Revenue 2,629,640

Other Revenue 60,000

Total Gross Revenue 2,689,640

Direct Expenses

Labor $770,700

Other $60,000

Subtotal $830,700

Indirect Expenses

Labor $424,300

Labor Burden $358,500

G&A $900,000

Subtotal $1,682,800

Total Expenses $2,513,500

Earnings before taxes $176,140

Gross Profit % 6.5%

Average Labor Multiplier 3.41

Exercise 2
Scenario:
+ Your company has been losing a lot of proposals in the last 4 months
+ The office currently has enough work but will run out of work in 6 months if you don’t win a few
good sized contracts in the next 3-4 months.
+ As a result of the lost proposals Maria, the office manager has assigned Harry
additional marketing and proposal coordinating duties to assist her in capturing new business
+ At the current utilization and fee rates the company is barely showing minimal profits as shown
($176k earnings before taxes, Gross Profit < 7%) + Maria estimates that Harry's utilization will reduce to 40% + Maria has asked everyone in the office to pitch in to make ends meet until things turn around + Project Engineers can't afford to reduce their client marketing efforts under the circumstances but believe they can get their utilization up to 85% + The question remaining is how much more work will the staff engineers & CAD operator have to do to keep the company at the break even point Your task: + Change Harry's availability to 40% and the Project Engineer's to 85% + Adjust the availability for the Staff Engineers and CAD Operator until you achieve Gross Profit before taxes of at least 12.0%. The availability (utilization) for each title classification should be the same for the entire classification (i.e., you would not have diffierent utilization rates for each person listed as a Staff Engineer). + Record the availability of the Staff Engineers and CAD Operator needed to get to a minimum 12% Gross Profit Exercise 3 EGR/BUS 445: Sample Profit & Loss Statement Labor Costs Name Title / Job Classification Annual Salary ($) Hrly Salary Total Hours % Utilization Direct Hours Indirect Hours Direct Indirect Hourly Billing Rate Labor Multiplier Gross Rev Maria Principal $150,000 72 2,080 40% 832 1,248 $60,000 $90,000 185 2.57 153,920 Harry Project Manager $125,000 60 2,080 0% 0 2,080 $0 $125,000 175 2.91 0 Natalie Project Manager $115,000 55 2,080 0% 0 2,080 $0 $115,000 175 3.17 0 Yousef Project Engineer $101,000 49 2,080 0% 0 2,080 $0 $101,000 155 3.19 0 Nicole Project Engineer $95,000 46 2,080 0% 0 2,080 $0 $95,000 155 3.39 0 David Project Engineer $90,000 43 2,080 0% 0 2,080 $0 $90,000 155 3.58 0 Jonathon Staff Engineer $79,500 38 2,080 0% 0 2,080 $0 $79,500 115 3.01 0 Alberto Staff Engineer $76,000 37 2,080 0% 0 2,080 $0 $76,000 115 3.15 0 Sandy Staff Engineer $74,300 36 2,080 0% 0 2,080 $0 $74,300 115 3.22 0 Rebecca Staff Engineer $67,000 32 2,080 0% 0 2,080 $0 $67,000 115 3.57 0 Jennifer Staff Engineer $64,000 31 2,080 0% 0 2,080 $0 $64,000 115 3.74 0 Kit Staff Engineer $60,000 29 2,080 0% 0 2,080 $0 $60,000 115 3.99 0 Fran CAD Operator $50,000 24 2,080 0% 0 2,080 $0 $50,000 95 3.95 0 Gaspar Admin Asst $45,000 22 2,080 25% 520 1,560 $11,250 $33,750 75 3.47 39,000 Pat Executive Assistant $60,000 29 2,080 25% 520 1,560 $15,000 $45,000 75 2.60 39,000 Beth Controller $80,000 38 2,080 0% 0 2,080 $0 $80,000 0 0.00 0 $1,331,800 33,280 1,872 31,408 $86,250 $1,245,550 Total Labor Revenue 231,920 Other Revenue 0 Total Gross Revenue 231,920 Direct Expenses Labor $86,250 Other $45,000 Subtotal $131,250 Indirect Expenses Labor $1,245,550 Labor Burden $332,950 G&A $998,850 Subtotal $2,577,350 Total Expenses $2,708,600 Earnings before taxes -$2,476,680 Gross Profit % -1067.9% Average Labor Multiplier 2.69 Exercise 3: Determine your Utilization Rates to achieve a labor multiplier that will yield a Gross Profit of 400,000 for the upcoming business year + The utilization rates will be the same for each job classification, understand the higher the position, the lower the utilization rate. Utilization rates for Principal and non-production staff are already set. + The hourly rates are set based on your current contracts + Look at the earnings before taxes before you start and determine your break even multiplier, then add in the profit to detemine your target multiplier. Use this information to assist you in determining how much revenue each job classification must generate to meet your target Gross Profit + Adjust the utilization rates until you reach the target Gross Profit + Write down your gross revenue and your Average Labor multiplier