Confused Company is considering changing its legal fee representation. Information on the current and proposed annual costs is as follows:

● Current structure: $7,000 fixed retainer fee and $120 per legal hour billed.

● Proposal from new firm: $3,000 fixed retainer fee, $80 per associate legal hour, and $250 per partner legal hour.

● Over the past three years, the company used an average of 70 hours of legal services per year.

● Management estimates that 40% of the hours billed by the current legal firm are related to the partner’s time.

● The company has used the current legal firm for the last 10 years.

● The new firm enjoys a good reputation. Even though the managing partner of the new firm is the cousin of the chief operating officer, the company’s Code of Ethics does not prohibit the company from entering into such a relationship.

a. What is the cost savings with the new firm at the current estimated usage?

b. What other information is relevant?