Baker and Klatt (BK) is a law firm that gets a large portion of its revenue from corporate clients. In Year 2, BK’s billable hours for corporate clients were up 20 percent from Year 1 levels, but, as the following data show, profits from corporate clients were the same in Year 2 as in Year 1.

Prepare an analysis like Exhibit 10.8 that shows why Year 2 operating profits did not increase despite the increase inrevenues.