A Lawyer Allocates Overhead Costs Based on His Hours Working

question 18

Essay

A lawyer allocates overhead costs based on his hours working with different clients. The lawyer expects to have $200,000 in overhead during the year and expects to work on clients' cases 2,000 hours during the year. In addition, she wants to pay herself $50 per hour for working with clients. In other words, the lawyer's billing rate is the sum of her hourly fee ($50) and a fee to recover the expected overhead spread over 2,000 hours. The lawyer, however, does not bill all of her clients based on covering overhead costs and her own salary. Some clients pay her on contingency fees. If the lawyer works with a client on a contingency fee basis, the lawyer receives half of any settlement for her client. During the year the lawyer works 1,200 hours that are billable to clients. The remaining hours are worked on a contingency basis. The lawyer wins $300,000 in settlements for his clients of which she receives half. Actual overhead was $210,000.
Required:
What does the lawyer earn during the year after expenses?

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Definitions:

Gangs

Organized groups often engaged in illegal activities and identified by their distinct collective identity.

Sports

Competitive physical activities or games which, through casual or organized participation, aim to use, maintain or improve physical ability and skills.

Self-understanding

An individual’s conception and perception of themselves, including their identity, values, and beliefs, which influences their behavior and interactions.

Atypical Identities

Identities that fall outside what is considered normal or typical within a specific cultural or social context, often challenging conventional categories.