What should we bill clients for one day of consultants’ time if we? Company bill

Question

What should we bill clients for one day of consultants’ time if we?

Company bills out its total of 3 consultants at a daily rate. A consultant’s goal is to bill 160 days per year. Consultant A is paid $200,000 per year before bonus, Consultant B is paid $180,000 per year before bonus and Consultant C earns $160,000 per year before bonus. Each consultant requires an admin person who costs the firm $60,000 per year (this includes all costs). So total costs for these admins is $180,000. (continued on next page) Benefits cost the firm $30,000 for each consultant. Other overhead for the firm is $400,000. The company wishes to earn $230,000 after paying each consultant for the days they worked.

Assume the company has no other costs than the ones mentioned. What should be the daily rate that is charged to clients for a consultant?

Assume that the rate is the same for each consultant.

Explanation / Answer

Daily rate that is charged to clients for a consultant:

Amount Paid to 3 Consultants ($200,000+$180,000+$160,000)     : $540,000

3 Admin Person’s cost (3*$60,000) : $180,000

Benefits cost the firm (3*$30,000) : $90,000

Other Overheads : $400,000

Company Wishes to earn (3*230,000) : $ 690,000

Total Amount Required : $1,900,000

Number of Days : 160

Amount Charged Per day ($1,900,000/160) : $11,875

Number of Consultants : 3

Amount per consultant ($11,875/3) : $3958   

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