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Question

Why doesn't the profit percentage equal the fee % in the JSR?

Solution

This is related to the parallel question, why is net margin not equal to fee? In short, this is because fee is based on cost while profit percentage is based on revenue.

  • Profit is a % of revenue (Net Profit $/Revenue$)
  • Fee is a % of cost (Fixed Fee $/Applicable Project Cost $)

In the example below, the fee is 10% calculated on labor and expenses. The lines in bold indicate the percentages in question.

  • Total Labor and Expenses are $11,456.13
  • Total fixed fee is 10% of that, or $1,145.61
  • Revenue is $19,799.73
  • Total burdened project cost is $18,506.81
  • Net Margin (Revenue less Total burdened project cost) is $1,292.93
  • Profit Percentage is 6.53% (Net margin divided by revenue)

Here is the formula to put in the Cost Report definition:

 


And here are the results in the JSR:



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