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Terry Smith and two of his colleagues are considering opening a law office in a large metropolitan area that would make inexpensive having the office
Terry Smith and two of his colleagues are considering opening a law office in a large metropolitan area that would make inexpensive having the office open 360 days per year, 16 hours each day from 7:00 a.m. to 11:00 p.m. The office would be staffed by a lawyer, paralegal, legal secretary, and clerk-receptionist for each of the two eight-hour shifts. In order to determine the feasibility of the project, Smith hired a marketing consultant to assist with market projections. The result this study show that if the firm spends $985,000 on advertising the first year, the number of new a dilients expected Smith and his associates believe this number is reasonable and are prepering information about the operation of the office follows: - The only charge to each new client would be $61 for the initial consultation. All cases that warrant further legal work will be accepted on a contingency basis with the firm earning 30 percent of any favorable settlements or judgments. Smith estimates that that there will be repeat clients during the first year of operations. - The hourly wages of the staff are projected to be $51 for the lawyer, $41 for the paralegal, $31 for the legal secretary, and $21 for the one-half times the regular wage, and the fringe benefit expense will apply to the full wage. - Smith has located 6,000 square feet of suitable office space that rents for $57 per square foot annually. Associated expenses will be $54,500 for property insurance and $74,800 for utilities. - It will be necessary for the group to purchase malpractice insurance, which is expected to cost $361,000 annually. - The initial investment in the office equipment will be $121,000. This equipment has an estimated useful life of four years. - The cost of office supplies has been estimated to be $9 per expected new client consultation. Required: 1. Determine how many new clients must visit the law office being considered by Terry Smith and his colleagues in order for the venture to break even during its first year of operations. (Round your final answer up to the next whole number.) 2. Compute the law firm's safety margin. Terry Smith and two of his colleagues are considering opening a law office in a large metropolitan area that would make inexpensive having the office open 360 days per year, 16 hours each day from 7:00 a.m. to 11:00 p.m. The office would be staffed by a lawyer, paralegal, legal secretary, and clerk-receptionist for each of the two eight-hour shifts. In order to determine the feasibility of the project, Smith hired a marketing consultant to assist with market projections. The result this study show that if the firm spends $985,000 on advertising the first year, the number of new a dilients expected Smith and his associates believe this number is reasonable and are prepering information about the operation of the office follows: - The only charge to each new client would be $61 for the initial consultation. All cases that warrant further legal work will be accepted on a contingency basis with the firm earning 30 percent of any favorable settlements or judgments. Smith estimates that that there will be repeat clients during the first year of operations. - The hourly wages of the staff are projected to be $51 for the lawyer, $41 for the paralegal, $31 for the legal secretary, and $21 for the one-half times the regular wage, and the fringe benefit expense will apply to the full wage. - Smith has located 6,000 square feet of suitable office space that rents for $57 per square foot annually. Associated expenses will be $54,500 for property insurance and $74,800 for utilities. - It will be necessary for the group to purchase malpractice insurance, which is expected to cost $361,000 annually. - The initial investment in the office equipment will be $121,000. This equipment has an estimated useful life of four years. - The cost of office supplies has been estimated to be $9 per expected new client consultation. Required: 1. Determine how many new clients must visit the law office being considered by Terry Smith and his colleagues in order for the venture to break even during its first year of operations. (Round your final answer up to the next whole number.) 2. Compute the law firm's safety margin
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