(a) Jenny is working currently as an Accountant. Her current monthly salary is $40,000. Jenny plans...

 

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(a) Jenny is working currently as an Accountant. Her current monthly salary is $40,000. Jenny plans to quit her job and start her own business. She has drafted herself an accounting income statement for the coming year if she runs her new business. Drafted Accounting Income statement for the year ended 31 December $ Service revenue Less: Expenses Salaries for Andrew (Junior Accountant) Salaries for Sally (Junior Accountant) Depreciation: Office equipment Utility expense Net Income 270,000 270,000 42,000 400,000 $ 2,400,000 982,000 1,418,000 To finance the business, Jenny has to withdraw her time deposit of $1,400,000 with an annual interest rate of 4% from the bank. She can use her premises to set up the office and the monthly rent of an office is $20,000. She will use $420,000 to purchase the equipment and furniture. According to the market information, the resale value of the equipment and furniture is $250,000 after one year. (For question 1 (a) (i) and (ii), NO Accounting vertical format of calculation is accepted and significant mark penalty will be given for wrong data presentation format. Students should make reference to the exercises of tutorial 6 for the correct format of presenting the working steps). Marginal revenue (MR) function: MR= 8000-0.4Q Marginal cost (MC) function: MC = 0.6Q i) Calculate the total annual economic implicit costs of Jenny's new business. Show your workings and list the expense items respectively. (5 marks) ii) Calculate the total economic profit of Jenny's new business. Show your workings and list the expense items respectively. (5 marks) iii) Based on your findings, briefly explain whether you support Jenny's plan to start the business. (2 marks) (b) In Country A, there is only one refrigerator factory, Nanasonic which owns all the materials. Currently the firm has the following demand, marginal revenue and marginal cost function: Market demand function: Q=40000-5P i) State the profit maximization condition and calculate the profit maximizing price and output of refrigerators produced by Nanasonic. (3 marks) ii) Suppose Nanasonic enjoys good time of business condition now. With the aid of a diagram, show the current market situation of Nanasonic and label the figures you obtain from (b)(i) in this diagram. NO explanation is required. (5 marks) (a) Jenny is working currently as an Accountant. Her current monthly salary is $40,000. Jenny plans to quit her job and start her own business. She has drafted herself an accounting income statement for the coming year if she runs her new business. Drafted Accounting Income statement for the year ended 31 December $ Service revenue Less: Expenses Salaries for Andrew (Junior Accountant) Salaries for Sally (Junior Accountant) Depreciation: Office equipment Utility expense Net Income 270,000 270,000 42,000 400,000 $ 2,400,000 982,000 1,418,000 To finance the business, Jenny has to withdraw her time deposit of $1,400,000 with an annual interest rate of 4% from the bank. She can use her premises to set up the office and the monthly rent of an office is $20,000. She will use $420,000 to purchase the equipment and furniture. According to the market information, the resale value of the equipment and furniture is $250,000 after one year. (For question 1 (a) (i) and (ii), NO Accounting vertical format of calculation is accepted and significant mark penalty will be given for wrong data presentation format. Students should make reference to the exercises of tutorial 6 for the correct format of presenting the working steps). Marginal revenue (MR) function: MR= 8000-0.4Q Marginal cost (MC) function: MC = 0.6Q i) Calculate the total annual economic implicit costs of Jenny's new business. Show your workings and list the expense items respectively. (5 marks) ii) Calculate the total economic profit of Jenny's new business. Show your workings and list the expense items respectively. (5 marks) iii) Based on your findings, briefly explain whether you support Jenny's plan to start the business. (2 marks) (b) In Country A, there is only one refrigerator factory, Nanasonic which owns all the materials. Currently the firm has the following demand, marginal revenue and marginal cost function: Market demand function: Q=40000-5P i) State the profit maximization condition and calculate the profit maximizing price and output of refrigerators produced by Nanasonic. (3 marks) ii) Suppose Nanasonic enjoys good time of business condition now. With the aid of a diagram, show the current market situation of Nanasonic and label the figures you obtain from (b)(i) in this diagram. NO explanation is required. (5 marks)

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Solution to Question a i IMPLICIT COSTS These are those costs that occur because a benefit has to be foregone for the same and they act as opportunity ... View the full answer