Don Masters and two of his colleagues are considering opening a law office that would make inexpensive legal services available to those who could not otherwise afford these services. The intent is to provide easy access for their clients by having the office open 360 days per year, 16 hours each day from 7:00 am to 11:00 pm. The office would be staffed by a lawyer, paralegal, legal secretary and clerk-receptionist for each of the two 8-hour shifts. To determine the feasibility of the project, Master hired anew marketing consultant to assist with market projections. The results of this study show that if firm spends P500,000 on advertising the first year, the number of new clients expected each day would have the following probability distribution.

Number of New Clients per Day Probability

20 .10

30 .30

55 .40

85 .20

Masters and his associates believe this numbers are reasonable and are prepared to send the P500,000 on advertising. Other information about the operation of the office is given below. The only charge to each new client would be P30 for the initial consultation. All cases that warranted further legal work would be accepted on a contingency basis with the firm earning 30% of any favorable settlements or judgments. Master estimates that 20 of new client consultations will result in favorable settlements or judgments averaging P2,000 each. It is not expected that there will be repeat clients during the first year of operations. The hourly wages of the staff are projected to be P25 for the lawyer, P20 for the paralegal, P15 for the legal secretary and P10 for the clerk-receptionist. Fringe benefit expense will be 40% of the wages paid. A total of 400 hours of overtime is expected for the year, this will be divided equally between the legal secretary and clerk-receptionist positions. Overtime will be paid at one and one-half times the regular wage and the fringe benefit expense will apply to the full wage. Masters has located 6,000 square feet of suitable office space which rents for P28 per square foot annually. Associated expenses will be P22,000 for property insurance and P32,000 for utilities. It will be necessary for the group to purchase malpractice insurance which is expected to cost P180,000 annually. The initial investment in office equipment will be P60,000; this equipment has an estimated useful life of 4 years. The cost of office supplies has been estimated to be P4 per expected new client consultation.

33. What is the expected total fixed expenses for the year?

34. What is the law offices breakeven point?

35. What is the expected number of clients per day?