A small consulting engineering company bought an office building for $900,000. The company has eight engineers and eight support staff. Monthly expenses for for salaries, utilities, grounds maintenance, etc., are $110,000. Use an average billing rate per engineer of $80 per hour and an interest rate of 1.4% per month. Assume the building will have a market value of $1.8 million after 13 years.
(a) Assuming a billing efficiency of 45%, what is the net profit per month?
(b) What must the hourly billing rate be to break even at this utilization rate?