How much profit or loss would the partnership make?

Belvedere, Bharat & Burgess are in partnership together as accountants. They have recently enlarged their practice and have taken on extra staff. The partners meet to discuss charge-out rates, which currently stand at €110 per hour for each of the three partners, €85 per hour for senior staff and tax specialists and €50 per hour for all other grades of qualified accountant. The partnership operates on the assumption that 75% of hours worked will be chargeable to clients as fees, and that a 43 week year is worked, at 8 hours per working day. Costs are expected to amount to €1 275 000 in the coming year, 2008.

i) If the partners’ assumptions are correct, how much in fees could the partnership expect to bill in 2008? ii) If hours are worked exactly as planned, the average recovery rate on billing is actually 94%, and total actual costs are 1% above budget in 2007 how much profit or loss would the partnership make?

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