The Law Firm of Dewey, Cheatham, and Howe Specializes in Accident

question 56

Multiple Choice

The law firm of Dewey, Cheatham, and Howe specializes in accident injury claims.The firm charges its clients 25% of any damage award given.The only cost to the firm of producing an accident injury claim is the time spent by a junior partner working on the case.Junior partners are paid $100 per hour for this drudgery.If the firm is suing for damages of $640,000 and if its chances of winning a case are 1/25h, where h is the number of hours spent working on the case, then to maximize its profits, how many hours should it have the junior partner spend working on the case?

• A)24
• B)40
• C)8
• D)12
• E)None of the above.

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Definitions:

First-In, First-Out

An inventory valuation method where the first items placed in inventory are the first ones sold, used primarily for cost flow assumption purposes.

Conversion Costs

Costs that are incurred to convert raw materials into finished products, typically including direct labor and manufacturing overhead.

Completed Units

The term refers to items that have been fully manufactured, processed, or finished and are ready for sale.

Equivalent Units

A calculation used in process costing to convert partially completed units into a number of fully completed units.