One cost efficiency indicator shows the magnitude of the indirect costs added to each dollar of direct labor charged to projects. What is it called?

• A. Total Labor Multiplier (TLM)
• B. Overhead Rate
• C. Indirect Cost Ratio
• D. Labor Productivity Index

Answer: (C)

This metric expresses how much indirect cost is added for every dollar of direct labor charged to projects. It’s called the indirect cost ratio—a simple ratio of indirect costs to direct labor costs. For example, if indirect costs total 50,000 and direct labor is 200,000, the ratio is 0.25, meaning 25 cents of indirect cost per dollar of direct labor. This per-dollar perspective makes it easy to see the overhead burden on labor and to compare cost efficiency across projects or periods. It’s like a measuring stick for how much overhead sits on top of each dollar of direct work. A total labor multiplier would blend direct and indirect costs into a single factor, and a productivity index looks at output per input, not the overhead burden. The notion of an overhead rate is closely related, but the ratio phrasing highlights the per-dollar relationship this question emphasizes.