Question

In: Economics

Lynn is thinking about leaving her job as a CPA to open a clothing store. The...

Lynn is thinking about leaving her job as a CPA to open a clothing store. The estimated revenue for a year is $200,000. Her costs are $120,000 in rent, insurance, utilities, equipment, and inventory. She would also be forgoing her wages of $75,000 in order to run her business full time.

a. What is her accounting profit?

b. What is her opportunity costs?

c. What is her economic profit?

d. Should she leave her job and open this clothing store?

Expert Solution

(A) ANSWER :: $80000

=> Accounting Profit = Total Revenue - Explicit Cost

= $200000 - $120000

= $80000

(B) Opportunity Cost :: $75000

It Is The Cost Which Is Associated With Loss Of Other Alternative When One Alternative Chosen It Is Know As Its Is A Cost Of Not Chosen Alternative

In Above example Opportunity Cost Is $75000 Because To Chose Open Clothing Store Lynn Quit Its Job That Pay Him $75000 So It Could Be Opportunity Cost For Him.

(C) ANSWER ::

=> Economic Profit :: Total Revenue - (Explicit Cost + Opportunity Cost )

= $200000 - ($120000 + $75000)

= $200000 - $195000

= $5000

(D)ANSWER ::

YES, Because The Accounting Profit Is $80000 And Its Wages On Job Is $75000 So We Clearly Shows That There Is A Profit For Lynn Of $5000 Which Is He Earn Extra Income By Clothing Store In Comparison To Job. If Lynn Wanted To Earn $5000 Extra Income He Have To Quit His Job And Run Its Business Full time.

Rahul Sunny answered 8 months ago

4.5 Mary is thinking of quitting her current job to operate an upstairs bakery store. Her...

4.5 Mary is thinking of quitting her current job to operate an upstairs bakery store. Her current salary is $240,000 per year. Consider the following information for the coming year if she goes ahead to operate the upstairs bakery store full time. To operate this business, Mary will use the unit she owns in a commercial building for her bakery store. Mary will earn a rental income of $180,000 in the coming year if she does not use the unit...

A clothing store is open each day for 12 hours. On average, the store gets 120...

A clothing store is open each day for 12 hours. On average, the store gets 120 customers per day. Round each answer below to the nearest hundredth. a. Find the probability that the store gets 140 or more customers today. b. Find the probability that the store gets 15 or more customers in the first hour of business. c. Find the probability that the store gets 40 or more customers in the first three hours of business. **Please show me...

Lynn Price recently completed her MBA and accepted a job with an electronics manufacturing company. Although...

Lynn Price recently completed her MBA and accepted a job with an electronics manufacturing company. Although she likes her job, she is also looking forward to retiring one day. To ensure that her retirement is comfortable, Lynn intends to invest $3,000 of her salary into a tax-sheltered retirement fund at the end of each year. Lynn is not certain what rate of return this investment will earn each year, but she expects each year’s rate of return could be modeled...

This is a national chain of clothing stores. They are currently thinking about closing one of...

This is a national chain of clothing stores. They are currently thinking about closing one of their stores because of continuing losses. The most recent annual income statement is given below. Net sales 2,215,000 Cost of goods sold 1,465,000 Gross margin 750,000 Expenses: Manager salary 65,000 Asst Manager salary 35,000 Sales staff salaries 230,000 Sales commissions 221500 Rent 54300 Utilities 24,000 Advertising 90,000 Maintenance 36,000 General overhead 80,000 835,800 Net loss -85,800 The manager's salary is set by her boss,...

Sherry Hopson owns a retail family clothing store. Her store is located at 4321 Heather Drive,...

Sherry Hopson owns a retail family clothing store. Her store is located at 4321 Heather Drive, Henderson, NV 89002. Her employer identification number is 95-1234321 and her Social Security number is 123-45-6789. Sherry keeps her books on an accrual basis. The income and expenses for the year are: Gross sales $351,700 Returns and allowances 4,000 Expenses: Beginning inventory (at cost) $ 84,300 Add: purchases 100,700 Cost of goods available for sale 185,000 Less: ending inventory (at cost) 75,000 Cost of...

Deborah's is a national chain of clothing stores. They are currently thinking about closing their Knoxville,...

Deborah's is a national chain of clothing stores. They are currently thinking about closing their Knoxville, Tennessee store because of continuing losses. The most recent annual income statement is given below. Net sales 2,215,000 Cost of goods sold 1,465,000 Gross margin 750,000 Expenses: Manager salary 65,000 Asst Manager salary 35,000 Sales staff salaries 230,000 Sales commissions 221500 Rent 54300 Utilities 24,000 Advertising 90,000 Maintenance 36,000 General overhead 80,000 835,800 Net loss -85,800 The manager's salary is set by her boss,...

Juanita has an opportunity to invest in her friend's clothing store. The initial investment is $10,200...

Juanita has an opportunity to invest in her friend's clothing store. The initial investment is $10,200 and the expected annual cashflows thereafter are {$300; $700; $1,300; $2,000; $2,000; $5,000; $5,000}. What is Juanita's IRR on this investment? (Allow two decimals in the percentage but do not enter the % sign.)

Sally's a national chain of clothing stores. They are currently thinking about closing their Phoenix, Arizona...

Sally's a national chain of clothing stores. They are currently thinking about closing their Phoenix, Arizona store because of continuing losses. The most recent annual income statement is given below. Net sales 2,215,000 Cost of goods sold 1,465,000 Gross margin 750,000 Expenses: Manager salary 65,000 Asst Manager salary 35,000 Sales staff salaries 230,000 Sales commissions 221500 Rent 54300 Utilities 24,000 Advertising 90,000 Maintenance 36,000 General overhead 80,000 835,800 Net loss -85,800 The manager's salary is set by her boss, the...

Michelle's Classic Clothing Store has extended credit to customers on open account. Its average experience for...

Michelle's Classic Clothing Store has extended credit to customers on open account. Its average experience for each of the past 3 years has been as follows: Michelle Lebeck is considering whether to accept bank cards (for example, VISA or MasterCard). She has resisted because she does not want to bear the cost of the service, which would be 4% of gross sales. The representative of VISA claims that the availability of bank cards would have increased overall sales by at...

BACKGROUND Laura Moore has recently left her job as a Graphic Designer to open her own...

BACKGROUND Laura Moore has recently left her job as a Graphic Designer to open her own Company; a Graphic Design Agency dedicated to the creation and design of apps for mobile devices. Laura has decided to be self-employed. To do so, she will have her business premises, which belongs to her father, in Barcelona downtown and she will have to hire: A visual designer A developer An administrative assistant 1. To hire the administrative assistant, Laura has decided to offer...