Rebeckah S. Lamb
BUS640: Managerial economicals
Michael Thirtle
June 4, 2012
Chapter 1: Applied Problem 1
At the beginning of the year, an auditory sensation engineer quit his job and gave up a salary of $175,000 per year in order to cash in ones chips his own business, vigorous Devices, Inc. The new company builds, installs, and maintains custom audio equipment for businesses that require high-quality audio systems. A partial income statement for Sound Devices, Inc., was shown.
To shit started, the owner of Sound Devices spent $100,000 of his personal savings to pay for some of the capital equipment used in the business. In 2010, the owner of Sound Devices could have earned a 15 percent return by investing in stocks of early(a) new businesses with risk levels similar to the risk level at Sound Devices.
a. What argon the total overt, total implicit, and total stinting costs in 2010?
The total explicit costs are the cost of products and services sold ($355,000).
b. What is accounting net income in 2010?
The accounting profit is the total revenue ($970,000) minus explicit costs ($355,000).
whence;
Total Revenue - Explicit be = Accounting Profit
$970,000- $355,000= $615,000
c. What is economic profit in 2010?
The economic profit is the total revenue ($970,000) minus the total economic cost, which in this example includes total operating costs ($555,000), Interest get down ($45,000), Legal Expenses ($28,000) and Income Taxes ($165,000) for a total economic cost of $793,000. Therefore;
Total Revenue - Total Economic Cost = Economic Profit
$970,000 - $793,000 = $177,000
d. Given your answer in part c, evaluate the owners last to leave his job to start Sound Devices....If you want to get a full essay, order it on our website: Orderessay
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