Net marginal revenue, Will Truman & Associates, LLC is a

Net marginal revenue

Reference no: EM131018690

Net Marginal Revenue.

Will Truman & Associates, LLC is a successful Columbus-based law firm. Worker productivity at the firm is measured in billable hours, which vary between partners and associates.

Partner time is billed to clients at a rate of $250 per hour, whereas associate time is billed at a rate of $125 per hour. On average, each partner generates 25 billable hours per 40-hour workweek, with 15 hours spent on promotion, administrative, and supervisory responsibilities. Associates generate an average of 35 billable hours per 40-hour workweek and spend 5 hours per week in administrative and training meetings. Variable overhead costs average 50% of revenues generated by partners and, given supervisory requirements, 60% of revenues generated by associates.

A. Calculate the annual (50 work weeks) net marginal revenue product of partners and associates.

B. If partners earn $175,000 and associates earn $70,000 per year, does the company have an optimal combination of partners and associates? If not, why not? Make your answer explicit and support any recommendations for change.

Reference no: EM131018690

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