ECON 2030 : Danielle Cost Profit Example
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5. Sally is considering opening her own beauty salon. She anticipates the following costs per year:
Furniture: | $20,000 |
Equipment: | $14,000 |
Rent: | $12,000 |
Coloring products: | $6,000 |
Styling products: | $4,000 |
Sally is withdrawing $34,000 from her savings account that pays 4% interest/year to purchase the furniture and equipment; she will quit her current job that pays $25,000 per year. She expects total revenues from the new business in the first year to be $70,000. Calculate the following:
a. Explicit cost (list by item).
b. Implicit cost (list by item).
c. Accounting profit.
d. Economic profit.
e. Given this first-year information only, should Sally open a salon?5. Sally is considering opening her own beauty salon. She anticipates the following costs per year: