Amanda Smith, CPA is the managing partner of Izzy & Associates, LLP, and accounting firm with offices throughout the Midwest. Ms. Smith has noticed that attracting and retaining staff is causing bottlenecks within her audit business. She gathers the following data regarding her firms audits:

	Partners		Staff
Annual Capacity (hours)	60,000		600,000
Annual Production (hours)	50,000		600,000
Total Hours per Audit	100		1,200
Fixed Operating Costs	$ 15,000,000		$ 18,000,000
Fixed Operating Costs per Hour	$ 300.00		$ 30.00

The average audit brings in $100,000, and variable costs are negligible. Smith has unlimited demand for her firms audits. Consider each question individually.

1. If Izzy & Associates, LLP loses 10 staff to industry offers prior to any staff work being done, how much would that cost them (assume 2,400 annual staff hours per staff worker, and the firm cannot replace them, and assume salary savings of $700,000)?

2.

The average audit brings in $100,000, and variable costs are negligible. Smith has unlimited demand for her firms audits. Consider each question individually.

If Izzy & Associates, LLP can increase partner capacity by 500 hours by promising the partners a pizza party for $250, by how much will NOI change?