Rudolph, Donner, and Blitzen is a small, highly successful law firm in Markham, Ontario. The partners decide that they would like to give back to the community by opening a not-for-profit legal clinic in an economically disadvantaged neighbourhood. The services would provide low income clients with an opportunity to get first-class service at a fraction of the normal cost. They decide to assign one of their more experienced juniors to the clinic, but are unsure of how to set the price that would result in the clinic breaking even. As a result, they decide to operate the clinic for two months, observe the costs, and then set the pricing for the long term. For the month of January, they provided 120 hours of professional service; in February, this was 150 hours. The costs are summarized below:

Required

1. Classify each cost as fixed, variable, or mixed, using hours of professional service as the activity driver.2. Use the high-low method to separate the mixed costs into their fixed and variable components.3. Seth Jones, the chief accountant of the firm, has estimated that the clinic will average 140 professional hours per month. What would the total cost of operating the clinic be? How much is variable? How much is fixed?4. If the clinic is to be operated as a not-for-profit organization, how much will it need to charge per professional hour?5. Suppose the legal clinic averages 170 professional hours per month. How much would need to be charged per hour for the clinic to cover its costs? Explain why the per-hour charge decreased as the activity output increased.