Response to the following problem:
Luce & Morgan, a law firm in downtown Jefferson City, is considering opening a legal clinic for middle-and low-income clients. The clinic would bill at a rate of $18 per hour. It would employ law student as paraprofessional help and pay them $9 per hour. Other variable costs are anticipated to be $5.40 per hour, and annual fixed costs are expected to total $27,000.
Required:
1. Compute the breakeven point in billable hours.
2. Compute the breakeven point in total billings.
3. Find the new breakeven point in total billings if fixed costs should go up by $2,340.
4. Using the original figures, compute the breakeven point in total billings if the billing rate decreases by $1 per hour, variable costs decrease by $0.40 per hour, and fixed costs go down by $3,600.