Complete the following table by determining Hubert's accounting and economic profit of his boat business. Profit (Dollars) Accounting Profit Economic Profit Alternatively, the economic profit he would earn as an accountant would be $ If Hubert's goal is to maximize his economic profit, he True or false: Hubert is earning a normal profit. True False stay in the boat business.
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Implicit cost refers to the opportunity cost which is involved in doing a business. It is not a monetary payment but a loss incurred by giving up the next best alternative while making a decision.
Explicit cost requires a monetary payment. This is the actual cost that a firm bears while doing a business.
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- Rodriguez operates a variety store that provides an annual revenue of $550,000. Each year, he pays $25,000 in rent for the store, $20,000 in business taxes, and $400,000 on products to sell. He estimates he could put the $100,000 he has invested in the store into his friend's restaurant business instead and earn an annual 20% profit on his funds. He also estimates that he and his family could earn a total annual wage of $90,000 if they worked somewhere other than the store. Include a minus sign (-) in front of any negative values entered as a solution below. a. The total explicit costs of running the store are $ The total implicit costs of running the store are $ b. The accounting profit of the kariety store is $ The economic profit of the variety store is $Rodriguez operates a variety store that provides an annual revenue of $500,000. Each year, he pays $30,000 in rent for the store, $20,000 in business taxes, and $350,000 on products to sell. He estimates he could put the $80,000 he has invested in the store into his friend's restaurant business instead and earn an annual 20% profit on his funds. He also estimates that he and his family could earn a total annual wage of $90,000 if they worked somewhere other than the store. Include a minus sign (-) in front of any negative values entered as a solution below. a. The total explicit costs of running the store are $ The total implicit costs of running the store are $ b. The accounting profit of the variety store is $ ces The economic profit of the variety store is $ c. Rodriguez (Click to select) v consider closing down this business because he is making a (Click to select)Yakov lives in Montreal and runs a business that sells boats. In an average year, he receives $793,000 from selling boats. Of this sales revenue, he must pay the manufacturer a wholesale cost of $430,000; he also pays wages and utility bills totalling $301,000. He owns his showroom; if he chooses to rent it out, he will receive $15,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Yakov does not operate this boat business, he can work as a financial advisor and receive an annual salary of $50,000 with no additional monetary costs. No other costs are incurred in running this boat business. Identify each of Yakov's costs in the following table as either an implicit cost or an explicit cost of selling boats. Implicit Cost Explicit Cost The rental income Yakov could receive if he chose to rent out his showroom The wholesale cost for the boats that Yakov pays the manufacturer The salary Yakov could earn if he worked as a financial…
- Joseph migrated to Canada from Ghana 5 years ago. He currentlyworks in sales but is considering quitting work for two years to earn an MBA degree. His current job pays $40,000 per year (after taxes), but he could earn $55,000 per year (after taxes) if he had an MBA. Tuition is $10,000 per year, and the cost of an apartment near campus is equal to the $10,000 he is currently paying. His discount rate is 6 percent per year. He just turned 48 and plans to retire when he turns 60, whether or not he earns his MBA degree. Based on this information, should he go for an MBA degree? Explain carefully with appropriate calculations. Using time value of money to solve.Paolo lives in Philadelphia and operates a small company selling scooters. On average, he receives $712,000 per year from selling scooters. Out of this revenue from sales, he must pay the manufacturer a wholesale cost of $412,000. He also pays several utility companies, as well as his employees wages totaling $269,000. He owns the building that houses his storefront; if he choose to rent it out, he would receive a yearly amount of $1,000 in rent. Assume there is no depreciation in the value of his property over the year. Further, if Paolo does not operate the scooter business, he can work as a nurse and earn a yearly salary of $21,000 with no additional monetary costs, and rent out his storefront at the $1,000 per year rate. There are no other costs faced by Paolo in running this scooter company. (Questions in images)14. Lorenzo lives in New York City and runs a business that sells guitars. In an average year, he receives $851,000 from selling guitars. Of this sales revenue, he must pay the manufacturer a wholesale cost of $476,000; he also pays wages and utility bills totaling $281,000. He owns his showroom; if he chooses to rent it out, he will receive $71,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Lorenzo does not operate this guitar business, he can work as an accountant and receive an annual salary of $34,000 with no additional monetary costs. No other costs are incurred in running this guitar business. a. Which costs are considered explicit? Which costs are considered implicit? b. What is Lorenzo's total cost? C. What is Lorenzo's total revenue? d. What is Lorenzo's accounting profit? e. What is Lorenzo's economic profit? f. Is Lorenzo earning a normal profit? If his goal is to maximize economic profit, should Lorenzo quit the…
- Harish currently owns an apricot farm which in the past has been highly profitable with revenues of $65,000/year. Recently, a large storm damaged many of his trees and apricot farming equipment. To recover and get back to farming apricots again, Harish will need to spend $30,000. He is trying to decide whether to start apricot farming again or not. Select the item from the list provided to make the following statements true. 5. 4. 3. For Harish to consider leaving the apricot market, he must be experiencing a/an If Harish chose to replant, grow and sell apricots, his explicit cost would be (in dollar terms). 1. accounting profit 2. -$2,000/year 3. implicit cost 4. $30,000 for From an economic perspective, a/an Harish in growing apricots would be his opportunity cost. 5. economic loss 6. normal profit 7. $95,000 8. $35,000 9. explicit cost 10, economic profit 11.$65,000 12. $60,000Pat used to work as an aerobics instructor at the local gym earning $35,000 a year. Pat quit that job and started working as a personal trainer. Pat makes $50,000 in total annual revenue. Pat's only out- of-pocket costs are $12,000 per year for rent and utilities, $1,000 per year for advertising and $3,000 per year for equipment. Please enter your answers as whole numbers with no decimal places (ie. 5000 or $5000 not 5000.00 or "Five thousand dollars"). If you want to enter a negative number use a negative sign "-" and do not use parenthesis (ie. -2000 or -$2000 not (2000) or (-$2000)). What is Pat's accounting profit? What is Pat's economic profit? Did Pat make the right decision by becoming a personal trainer? (Yes or No)QUESTION 1: When Burton Cummings graduated with honors from the Canadian Trucking Academy, his father gave him a $350,000 tractor-trailer-rig. Recently, Burton was boasting some follows truckers that his revenues were typically $35,000 per month, while his operating costs (fuel, maintenance, and depreciation) amounted to only 18,000 per month. Tractor trailer rigs identical to Burton's rig rent for $15,000 per month. If Burton was driving for one of the competing trucking firms, he would earn $5,000 per month. All underlying work must be shown. A) How much is Burton's accounting cost? a) $18,000 b) $35,000 c) $33,000 d) $20,000 B) How much is Burton's economic cost? a) $18,000 b) $38,000 c) $20,000 d) $55,000 C) How much is Burton's economic profit? a) $17,000 b) $20,000 c) -$3,000 d) $15,000 D) What should Burton do? Should he stay in his trucking business or rent the rig and start working for the competing trucking company? Briefly explain. E) What is the minimum Burton should earn…
- Eric lives in Denver and operates a small-company selling bikes. On average, he receives $773,000 per year from selling bikes. Out of this revenue from sales, he must pay the manufacturer a wholesale cost of $452,000. He also pays several utility companies, as well as his employees wages totaling $277,000. He owns the building that houses his storefront; if he choose to rent it out, he would receive a yearly amount of $3,000 in rent. Assume there is no depreciation in the value of his property over the year. Further, if Eric does not operate the bike business, he can work as a nurse and earn a yearly salary of $32,000 with no additional monetary costs, and rent out his storefront at the $3,000 per year rate. There are no other costs faced by Eric in running this bike company. Identify each of Eric's costs in the following table as either an implicit cost or an explicit cost of selling bikes. Implicit Cost Explicit Cost The rental income Eric could receive if he chose to rent out his…1.4) You use RM40,000 of your own money to start a catering business. During the first year you earn a 5% return on that investment. If the current interest rate on savings is 8%, you earn an economic profit of Working Calculation:Sam lives in San Diego and operates a small company selling bikes. On average, he receives $694,000 per year from selling bikes. Out of this revenue from sales, he must pay the manufacturer a wholesale cost of $392,000. He also pays several utility companies, as well as his employees wages totaling $289,000. He owns the building that houses his storefront; if he choose to rent it out, he would receive a yearly amount of $2,000 in rent. Assume there is no depreciation in the value of his property over the year. Further, if Sam does not operate the bike business, he can work as a programmer and earn a yearly salary of $20,000 with no additional monetary costs, and rent out his storefront at the $2,000 per year rate. There are no other costs faced by Sam in running this bike company. Identify each of Sam’s costs in the following table as either an implicit cost or an explicit cost of selling bikes. Implicit Cost Explicit Cost The wages that Sam pays The…