XYZ Law Firm, LLP is considering representing a new client. All legal procedures will be carried out in City Z and not in City A as is normally the case with the rest of the firm's clients. It is estimated that the case will require the assignment of 3 lawyers and 5 days of work in City Z. A total of 903 hours are expected to be billed to the new client. The law firm's accountant is trying to determine the incremental cost of taking on this client and has requested his help.

REQUIRED : Indicate the total relevant cost by analyzing the following elements as they relate to accepting the new customer.

1. The case will require the three attorneys to stay 4 nights at a hotel in City Z. The expected hotel bill is $300 per night plus 17% taxes and hotel service charges.

2. Lawyers at the firm are paid $2,000 per day for assignments outside of City A,

3. Last year, the depreciation of the XYZ, LLP office in City A was $25,000.

4. Round-trip transportation to City Z is expected to cost $150 per person.

5. The firm has recently accepted another legal commitment that will require several partners to spend two weeks in City W. The expected expenses for this trip are $25,000.

6. The law firm has a maintenance contract for its copier equipment that will cost $2,200 next year.

7. If the firm accepts the new client and sends lawyers to City Z, it will have to reject a conflicting engagement in City A that would have provided a net cash inflow of $15,000.

8. The firm's variable overhead is $125 per client hour.

9. The firm pays $900 a year for a subscription to a law journal.

10. Last year, the firm paid $22,500 to upgrade the central air conditioning equipment in its building.

Answer rating: 100% (QA)

1 Hotel Expenses for Attorneys The cost of 4 nights at a hotel in City Z is relevant which includes ... View the full answer