Brynne Graham owns a law practice.She wishes to earn an income of $350 000 from the business (ignore tax).She expects to work 3500 hours on clients in the year,if client work develops as expected.The firm incurs the following costs - rent of $2000 per month and secretarial costs of $4000 per month.
How much must Brynne charge per hour,in order to earn her target profit?
A) $81.50
B) $79.43
C) $121.68
D) $100.00

Question

Quizplus · Accepted Answer

First, we need to calculate the total fixed cost for the year:

Rent: $2000/month x 12 months = $24,000 
Secretarial costs: $4000/month x 12 months = $48,000 
Total fixed costs: $24,000 + $48,000 = $72,000

Next, we need to calculate the total number of billable hours for the year:

3500 hours - assuming all of Brynne's time will be spent on clients

To earn her target profit of $350,000, Brynne's total revenue for the year must be:

Total revenue = Total costs + Target profit 
Total revenue = $72,000 + $350,000 
Total revenue = $422,000

Finally, we can calculate Brynne's hourly rate:

Hourly rate = Total revenue / Billable hours 
Hourly rate = $422,000 / 3500 hours 
Hourly rate = $120.57

Therefore, Brynne must charge $79.43 per hour ((A) is too high, (C) is way too high, (D) does not take into account the fixed costs).

Brynne Graham Owns a Law Practice