Barkley, Inc. has the following revenue and cost information.
Revenue............................................ $300 per consulting hour
Variable costs................................... $170 per consulting hour
Fixed costs......................................... $93,600 per month
Required:
(a) What is the break-even point per month in consulting hours?
(b) What is the break-even point per month in revenue dollars?
(c) If the average consulting engagement is 28 hours, how many consulting engagements per year will Barkley, Inc. need to break even?
(d) Assume that Barkley, Inc. wants to earn $7,800 in profits each month and has a 25 percent tax rate. How many consulting hours does the company need to work each month?
(e) How might Barkley, Inc. decrease variable costs per consulting hour? Fixed costs per month?
(f) Assume that Barkley, Inc. has decided to limit air travel by consultants. Instead the company will invest in a state-of-the-art satellite teleconferencing system. How will these decisions affect variable and fixed costs? What are the potential drawbacks of this decision?