Steve Clark and two of his colleagues are considering opening a law firm in Nilai that would make inexpensive legal advice available tothose who could not otherwise afford legal service. The intent is to provide easy access for their clients by having the office open 360 days per year, 16 hours each day from 7am to 11pm. The office would be staffed by a lawyer, a paralegal, a legal secretary and clerk-receptionist for each of the 2 eight-hour shifts.

To determine the feasibility of the project, Clark hired a marketing consultant to assist with market projections. The results of this study show that if the firm spends $980,000 on advertising in the first year, 50 new clients are expected each day.Clark and his associates believe that this number is realistic and are prepared to spend the $980,000 on advertising. Other pertinent information about the operation of the proposed business follows:

The only change to each new client would be $60 for the initial consultation. All cases that warrant further legal work will be accepted on a contingency basis with the firm earning 30% of any favourable settlement or judgement. Clark estimates that 20% of new client consultations will result in favorablesettlements or judgement averaging $4000 each. It is not expected that there will be repeat clients during the first year of operations.

The hourly wage of the staff are projected to be $50 for the lawyer, $40 for the paralegal, $30 for the legal secretary and $20 for the clerk-receptionist. Labour on cost will be 40% of wages paid. A total of $400 hours of overtime is expected for the year; this will be divided equally between the legal secretary and the clerk-receptionist positions. Overtime will be paid at one and a half times the regular wage, and the labour on cost will apply to the total wages paid.

Clark has allocated 6000 square meters of suitable office that can be rented for $56 per square meters annually. Associated expenses will be $54,000 for council rates and $74,000 for utilities.

It will be necessary for the group to purchase professional indemnity insurance, which is expected to cost $360,000 annually.

The initial investment in office equipment will be $120,000. This equipment has estimated useful life of 4 years.

The cost of office supplies has been estimated to be $8 per new client consultation.

• Determine how many new clients must visit the law office being considered by Steven Clark and his colleagues in order to for the venture to break even during its first year of operations.
• Determine the law firm's safety margin.
• Critically analyse the assumption that underlie your analysis and the limitation that they might imply.