Emily estimated that she will need to spend 16 hours each month on business development and networking, 40 hours per year on continuing education, and 16 hours each month on general business needs. In addition, she finds that she has to work approcimately 1.25 hours actual time for each hour that she can bill and collect. She will bill her time at a rate of $95 per hour.
Costs are expected as follows:
Rent on the office will be $425 per month ($5,100 per year)
Software is purchased on an annual licensing basis and will cost $2,475 per year
Insurance will cost $915 per year for general and workers comp coverage plus $1,495 per year for professional liability coverage
Purchases of office equipment are expected to be $1,400 per year
Telephone and internet fees are not expected to vary significantly with volume and will run $165 per month ($1,980 per year)
On some jobs it is necessary to use outside experts for engineering, technical, or surveying jobs. These costs average 15% of revenue overall.
Supplies for jobs are expected to be 1.75% of revenue
General supplies will be $105 per month ($1,260 per year)
Research publications, continuing education, dues, and professional licenses will run $1,800 per year
Bank fees will be 0.75% of sales
Question 1: Identify which costs are fixed costs and which costs are variable costs