Marcus & Marley is a law firm specializing in employment law. They estimate that they will have overhead costs of $2,200,000 during 2015. (Overhead includes all costs other than attorney salaries.) They believe overhead costs are driven by attorney hours. Attorney hours are estimated at 40,000 for the year. They have set a billing rate of $200 per hour for lawyers. All attorneys are paid $75 per hour.
Two new clients (Rey and Elle) have asked them for an estimate of fees to handle some of their legal work. The work for Rey is expected to take 100 hours. The work for Elle is expected to take 150 hours.
1. What is the overhead rate per attorney hour for Marcus & Marley?
2. What is the cost estimate for the Rey job?
3. Assuming they bill the job at the regular rate, how much profit should they expect on the Elle job?