each bill 1500 hours per year and receive pay of $100,000 each. Four paralegal work for the firm and each receives pay of $40,000 and works 2,000 hours per year. Overhead of $396,000 is anticipated, of which $300,000 is attorney support, and the rest is paralegal support. Determine overhead under each of the following circumstances:

Question

each bill 1500 hours per year and receive pay of $100,000 each. Four paralegal work for the firm and each receives pay of $40,000 and works 2,000 hours per year. Overhead of $396,000 is anticipated, of which $300,000 is attorney support, and the rest is paralegal support. Determine overhead under each of the following circumstances:

Answer 1

To determine the overhead under each circumstance, we need to calculate the overhead costs for attorney support and paralegal support separately.

First, let's calculate the overhead for attorney support:
- The firm has three attorneys, and each attorney bills 1,500 hours per year.
- Therefore, the total number of hours billed by attorneys per year is 3 attorneys * 1,500 hours/attorney = 4,500 hours.
- As each attorney receives a pay of $100,000 per year, we can divide the total attorney pay by the number of hours billed to calculate the cost per hour: $100,000 / 4,500 hours = $22.22 per hour.
- The overhead for attorney support is $300,000, as provided in the question.

The overhead for paralegal support can be determined using a similar approach:
- There are four paralegals, and each paralegal works 2,000 hours per year.
- Therefore, the total number of hours worked by paralegals per year is 4 paralegals * 2,000 hours/paralegal = 8,000 hours.
- Each paralegal receives a pay of $40,000 per year, so we can divide the total paralegal pay by the number of hours worked to find the cost per hour: $40,000 / 8,000 hours = $5 per hour.

Now, let's calculate the overhead under each circumstance:

1. Total overhead:
Total overhead = Overhead for attorney support + Overhead for paralegal support
Total overhead = $300,000 + (Number of paralegals * Overhead per paralegal)
Total overhead = $300,000 + (4 paralegals * $5 per hour * 2,000 hours/paralegal)

2. Overhead when attorneys work 1,600 hours per year:
Overhead for attorney support = Attorney hourly rate * Total attorney hours
Overhead for attorney support = $22.22 per hour * (Number of attorneys * Attorney hours)
Overhead for attorney support = $22.22/hour * (3 attorneys * 1,600 hours/attorney)

3. Overhead when paralegals work 1,800 hours per year:
Overhead for paralegal support = Number of paralegals * Paralegal hourly rate * Paralegal hours
Overhead for paralegal support = 4 paralegals * $5 per hour * (1,800 hours/paralegal)

By calculating the formulas above, you can determine the overhead under each circumstance.