Hamilton and Hamilton Attorneys at Law Recently Opened Up a Law

Essay

Hamilton and Hamilton Attorneys at Law recently opened up a law practice. Their goal is to generate a monthly net income of $10,000. They have initially set their billing rate at $150 per hour. Their billable hours in the first month of operations (January) were 150 and in the second month of operations (February), 175 billable hours. The costs incurred at these levels for January and February are given below.
150 billable hours 175 billable hours
Salaries:
Mr. Hamilton $10,000 $10,000
Ms. Hamilton 10,000 10,000
Legal Secretary 4,000 4,000
Depreciation (Furniture) 500 500
Supplies 450 525
Rent 1,000 1,000
Utilities 412 449.50
Required:
A. Classify each cost as fixed, variable, or mixed using billable hours as the driver.
B. Use the high-low method to separate mixed costs into their fixed and variable components.
C. Calculate the net income/loss for January and February.
D. If they expect to average 200 billable hours each month, what do they need to set as a billing rate per hour to achieve their goal of generating $10,000 of monthly net income? Show your calculations.