Problem:
Will Truman and Associates, LLC is a successful Manhattan based law firm. Worker productivity at the firm is measured in billable hours, which vary between partners and associates.
Partner time is billed to clients at a rate of 250 per hour whereas associates time is billed at a rate of 125 per hour. On average each partner generates 25 billable hours per 40 hour work week with 15 hours spent on promotion, administrative and supervisory responsibilities. Associates generate an average of 35 billable hours per 40 hour workweek and spend 5 hours per week in administrative and training meetings. Variable overhead costs average 50 percent of revenues generated by partners and given supervisory requirements, 60 percent of revenue generates by associates.
A. Calculate the annual 50 workweek net marginal revenue product of partners and associates.
B. If partner earn 175000 and associates earn 70,000 per year does the company have an optimal combination of partners and associates? If not why not? make sure answer explicit and support any recommendations for change.