Danielle_Cost_Profit_Example

Danielle_Cost_Profit_Example - quitting her current job...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Suppose Danielle is considering opening her own beauty salon. She anticipates the following costs per year: Furniture: $40,000 explicit Equipment: $30,000 explicit Rent: $18,000 explicit Coloring products: $12,000 explicit Styling products: $8,000 explicit Danielle is withdrawing $70,000 from her savings account that pays 2 percent interest per year to purchase the furniture and equipment and is
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: quitting her current job that pays $28,000. She expects that the total revenues from the new business in the first year will be $125,000. Calculate the following: Explicit costs: $108,000 Implicit costs: interest not being earned 2% of $70,000 = $1,400 + $28,000= $29,400 Accounting profit: $125,000 - $108,000 = + $17,000 Economic profit: -$12,400...
View Full Document

This note was uploaded on 10/19/2011 for the course ECON 2030 taught by Professor Bong during the Spring '07 term at LSU.

Ask a homework question - tutors are online