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Emily Smith and two colleagues are considering opening a law office in a large metropolitan area that would make inexpensive legal services available to those
Emily Smith and two colleagues are considering opening a law office in a large metropolitan area that would make inexpensive legal
services available to those who could not otherwise afford services. The intent is to provide easy access for their clients by having the
office open days per year, hours each day from : am to : pm The office would be staffed by a lawyer, paralegal, legal
secretary and clerkreceptionist for each of the two eighthour shifts.
In order to determine the feasibility of the project, Smith hired a marketing consultant to assist with market projections. The results of
this study show that if the firm spends $ on advertising the first year, the number of new clients expected each day will be
Smith believes this number is reasonable and is prepared to spend the $ on advertising. Other pertinent information
about the operation of the office follows:
The only charge to each new client would be $ for the initial consultation. All cases that warrant further legal work will be
accepted on a contingency basis with the firm earning percent of any favorable settlements or judgments. Smith estimates that
percent of new client consultations will result in favorable settlements or judgments averaging $ 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 $ for the lawyer, $ for the paralegal, $ for the legal secretary and $ for
the clerkreceptionist. Fringe benefit expense will be percent of the wages paid. A total of hours of overtime is expected for
the year; this will be divided equally between the legal secretary and the clerkreceptionist positions. Overtime will be paid at one
and onehalf times the regular wage, and the fringe benefit expense will apply to the full wage.
Smith has located square feet of suitable office space that rents for $ per square foot annually. Associated expenses will
be $ for property insurance and $ for utilities.
It will be necessary for the group to purchase malpractice insurance, which is expected to cost $ annually.
The initial investment in the office equipment will be $ This equipment has an estimated useful life of four years.
The cost of office supplies has been estimated to be $ per expected new client consultation.
Required:
Determine how many new clients must visit the law office being considered by Smith and his colleagues in order for the venture to
break even during its first year of operations.
Note: Round your final answer up to the next whole number.
Compute the law firm's safety margin.
Note: Round your final answer to the nearest whole number.
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