CASE ANALYSIS

1.
Don Masters and Associates Law Office
Income Statement
(in dollar)

Consultation revenue $540,000

Revenue from favorable settlement 2,160,000
Total revenue $2,700,000
Less: Variable cost
Cost of office supplies 72,000 72,000
Contribution margin 2,628,000
Less: Fixed cost
Advertising expense 500,000
Salaries expense 403,200
Fringe benefit expense 161,280
Office rent 168,000
Property insurance 22,000
Utilities 32,000
Malpractice insurance 180,000
Depreciation, office equipment 15,000 1,481,480
Profi
t $1,146,520

Consultation revenue:
50 clients/day x 360 days = 18,000 clients/year x $30/client = $540,000

Revenue from favorable settlement:

18,000 clients/year x 20% = 3,600 clients with favorable settlement x $2,000 =
$7,200,000 x 30% = $2,160,000

Cost of office supplies:

18,000 clients x $4 = $72,000

Salaries expense:
Lawyer $25 x (360 days x 16 hours) = $144,000
Paralegal $20 x (360 days x 16 hours) = $115,200
Legal secretary $15 x (360 days x 16 hours) = $ 86,400
2 clerk receptionists $10 x (360 days x 16 hours) = $ 57,600
 $403,200
Fringe benefit expense:
$403,200 x 40% = $161,280

Office rent:
6,000 feet2 x $28/foot2 = $168,000

Depreciation, office equipment:

$60,000/4 years = $15,000

¿ cost
2. BES units =
Contributionmargin/unit

$ 1,481,480
= $ 2,628,000 /18,000

= 10,147.12329 or 10,147 clients