Luce & Morgan, a law firm in downtown Jefferson City, is considering opening a legal clinic for middle- and low-income clients. The clinic would bill at a rate of $18 per hour. It would employ law students as paraprofessional help and pay them $9 per hour. Other variable costs are anticipated to be $5.40 per hour, and annual fixed costs are expected to total $27,000.
1. Compute breakeven point in billable hours?
2. Compute the breakeven point in total billings?
3. Find the new breakeven point in total billings if fixed costs should go up by $2,340?
4. Using the original figures, compute the breakeven point in total billings if the billing rate decreases by $1 per hour, variable costs decrease by $0.40 per hour, and fixed costs go down by $3,600?