A small consulting engineering company bought an office building for $910,000. T
ID: 2645402 • Letter: A
Question
A small consulting engineering company bought an office building for $910,000. The company has eleven engineers and eight support staff. Monthly expenses for for salaries, utilities, grounds maintenance, etc., are $108,000. Use an average billing rate per engineer of $85 per hour and an interest rate of 0.8% per month. Assume the building will have a market value of $1.2 million after 12 years.
(a)How many billable hours must each engineer generate per month to generate a profit of $16,000 per month?
______ billable hours per month per engineer
(b)Assume each engineer works 2000 hours per year. What is the necessary billing efficiency (utilization rate) to achieve this profit level?
_________%
Explanation / Answer
a. Let the no. of billable hours be x.
Marginal profit = Total monthly billing - monthly expenses = 85*11*x