Enter your annual costs
How it is calculated
Overhead rate = indirect operating costs ÷ direct labor cost. Cost multiplier = (direct labor cost + indirect operating costs) ÷ direct labor cost. Revenue multiplier = target labor revenue ÷ direct labor cost when target labor revenue is entered.
Cost classifications vary by firm and accounting method. These estimated ratios do not establish an appropriate billing rate or guarantee cost recovery. General education only, not engineering, legal, tax, or investment advice. Licensed PE judgment and local codes govern engineering work.
Example scenario
A hypothetical civil engineering firm owner enters $800,000 in direct labor cost, $400,000 in indirect operating costs, and $1,600,000 in target labor revenue. The calculator reports 50% overhead, a 1.50 cost multiplier, and a 2.00 revenue multiplier. The figures come from hypothetical firm inputs, not industry benchmarks or recommended billing targets. They can help the owner discuss how indirect costs relate to direct labor and how a revenue target compares with that cost base. The owner can use the ratios to identify questions for a budgeting or rate review, but they do not establish an appropriate billing rate or guarantee cost recovery. Next, confirm that labor and indirect costs are classified consistently with the firm’s accounting method, check the period covered by each input, and compare the target with actual labor revenue and operating results.
Method, inputs and limits
Purpose
Calculate overhead rate and cost multiplier from direct labor and indirect costs, with an optional revenue multiplier.
Inputs and defaults
Direct labor cost: $1,000,000; indirect operating costs: $1,200,000; target labor revenue: $2,400,000. Direct labor must exceed zero; other inputs are nonnegative. A zero target suppresses the optional revenue multiplier.
Formulas
Overhead rate = indirect costs ÷ direct labor cost × 100%. Cost multiplier = (direct labor cost + indirect costs) ÷ direct labor cost. Revenue multiplier = target labor revenue ÷ direct labor cost.
Outputs
Overhead rate, cost multiplier, optional revenue multiplier.
Test cases, expected values
- Defaults: 120% overhead; 2.20 cost multiplier; 2.40 revenue multiplier.
- $800,000 direct labor, $400,000 indirect costs, $1,600,000 target revenue: 50% overhead; 1.50 cost multiplier; 2.00 revenue multiplier.
- $1,000,000 direct labor, $0 indirect costs, $0 target revenue: 0% overhead; 1.00 cost multiplier; revenue multiplier not shown.
Disclaimer
Cost classification depends on firm accounting methods. These ratios do not establish an appropriate billing rate or guarantee cost recovery. General education only, not engineering, legal, tax, or investment advice.
