Eduardo, a teacher, earned $40,000 as his annual salary from his employer in 2018. But in 2019 he decided to quit that job and start his own business: manufacturing skateboards. Here's what he did to accomplish it: Stopped renting out his grandparents' cottage (for $8,000 a year) and used it as his factory instead. • He spent $60,000 on materials and utility bills. He got that money from his savings account, which was earning 5% annual interest. • He leased machines for $10,000 a year and paid $15,000 in wages. He sold $135,000 worth of skateboards. Eduardo's accounting profit is_____ but his economic profit is O160,000; 85,000 141,000; 160,000 O-1000; 50,000 50,000; -1000
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- Jason owns a small pizza restaurant, where he works full time in the kitchen. His total revenue last year was $136,000, and his rent was $2,610 per month. He pays his one employee $2,200 per month, and the cost of ingredients and overhead averages $960 per month. Jason could earn $32,600 per year as manager of al competing pizza restaurant nearby. What's Jason's accounting profit for the entire year? Your Answer: AnswerMicroeconomics Jon quit his job as a manager at West End Savings bank where he earned $112,000 a year. He cashed in $214,000 in corporate bonds that earned 1.0% interest annually to set up a gym. Jon has decided to buy a store front and set up exercise classes. There are 1400 people who will pay $1200 a year for unlimited classes; $850 from each person goes for instructors, maintenance, equipment, insurance, depreciation etc. Write the answers to the following questions on the answer sheet. (You must show your work.) 1. List 2 (in numbers) 2 implicit costs that Jon has not included. 2. What is Jon’s pure economic profit (or loss) in numbers?You are currently in a job as a chef in a restaurant earning $100,000 per year. You are considering opening up a restaurant in a building which you currently own. You estimate that, if you wanted to, you could rent out your building for $25,000 per year to another restaurant. Last year, your revenues and expenses from the restaurant were the following: Revenues $400,000Cost of Food $120,000Salaries/Wages $100,000Utilities $25,000Taxes $20,000 What is your accounting profit? Show your calculations What is your economic profit? Show your calculations Assuming that you are indifferent between being a chef or owning a restaurant, should you open up your restaurant? Explain why. Now suppose that instead of owning the building where your restaurant will be located, you had to pay rent of $25,000 per year for the building. Will your answers to parts 1-3 change? Show your calculations. Explain how and why your answers will change or…
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- Until recently, Mark worked as a financial advisor, earning $65,000 annually. Then he inherited a piece of commercial real estate that had been renting for $14,000 annually. Mark decided to leave his job and operate a sea food restaurant in the space he inherited. At the end of the first year, his books showed total revenues of $300,000, and paid a total cost of $200,000 for food, utilities, cooks, and other supplies: Show all your work including formulas learned to support your answer for each of the following: A) Calculate his explicit costs: B) Calculate his implicit costs. C) Calculate his accounting profits. D) Calculate his economic profits.Ball Bearings, Inc., faces costs of production as follows: Quantity (cases) Total Fixed Cost Total Variable Cost Total Cost Average Fixed Cost Average Variable Cost Average Total Cost Marginal Cost 0 $100 $0 $ 100.00 N/A N/A N/A N/A 1 100 50 $ 150.00 $ 100.00 $ 50.00 $ 150.00 $ 50.00 2 100 70 3 100 90 4 100 140 5 100 200 6 100 360 a. Calculate the company’s average fixed cost, average variable cost, average total cost, and marginal cost at each level of production.Alex Kingsford is a mechanical engineer working for ABC Engineering in Melbourne. Alex owns aproperty in Dandenong, Victorian where he and his family are residing. He also runs a homebasedfood catering business, preparing food for local residents and school canteens. Cateringbusiness is well-structured. Alex works 15 days a month and earns a substantial income from thecatering services business. He is travelling from ABC Engineering workshop to his homebasedbusiness by car or sometimes Uber. When he lodged his tax return in July 2019, he has requested a deduction for a substantial amount of travelling expenses between the ABCEngineering workshop and home-based food business.Alex is now seeking your advice. With reference to relevant legislation and case law discusswhether Alex’s travelling expenses between the ABC Engineering workshop and his homebasedcatering business is an allowable deduction.
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