Nancy is a professional accountant working at a famous accounting firm in Hong Kong with a...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Nancy is a professional accountant working at a famous accounting firm in Hong Kong with a monthly salary of $50,000. She loves making desserts so she proposes to quit her job and set up her own cupcake shop with an expected monthly revenue of $100,000. For the operations of her cupcake shop, Nancy needs to cease the rental contract of her own property from which she could receive $200,000 annually. She also needs a start-up capital so that she has to withdraw a time deposit of $1,000,000 in which she could earn 5% interest rate from a bank originally. Apart from these, she proposes to hire an assistant with a monthly salary of $15,000 and buy some equipment including ovens and refrigerator with cost of $20,000. With the high usage of such equipment, she believes the resale value will be $0 after one year. In addition, she will spend $50,000 annually as marketing expenses. The last but not the least, Nancy estimates the monthly expenses on flour, eggs and other raw materials will be $4,500. (a) Calculate the annual explicit costs, annual implicit costs and economics profit of Nancy's cupcake shop. List the items and show your workings. Would you recommend Nancy to run the cupcake shop? Explain. (12 marks) (b) Nancy's supervisor appreciates Nancy's work performance so much, so he would propose a salary increment for Nancy. What should be the minimum annual salary increment to keep Nancy working at the accounting firm? Explain. (3 marks) Nancy is a professional accountant working at a famous accounting firm in Hong Kong with a monthly salary of $50,000. She loves making desserts so she proposes to quit her job and set up her own cupcake shop with an expected monthly revenue of $100,000. For the operations of her cupcake shop, Nancy needs to cease the rental contract of her own property from which she could receive $200,000 annually. She also needs a start-up capital so that she has to withdraw a time deposit of $1,000,000 in which she could earn 5% interest rate from a bank originally. Apart from these, she proposes to hire an assistant with a monthly salary of $15,000 and buy some equipment including ovens and refrigerator with cost of $20,000. With the high usage of such equipment, she believes the resale value will be $0 after one year. In addition, she will spend $50,000 annually as marketing expenses. The last but not the least, Nancy estimates the monthly expenses on flour, eggs and other raw materials will be $4,500. (a) Calculate the annual explicit costs, annual implicit costs and economics profit of Nancy's cupcake shop. List the items and show your workings. Would you recommend Nancy to run the cupcake shop? Explain. (12 marks) (b) Nancy's supervisor appreciates Nancy's work performance so much, so he would propose a salary increment for Nancy. What should be the minimum annual salary increment to keep Nancy working at the accounting firm? Explain. (3 marks)
Expert Answer:
Answer rating: 100% (QA)
Lets calculate the annual explicit costs annual implicit costs and economic profit of Nancys cupcake ... View the full answer
Related Book For
Posted Date:
Students also viewed these accounting questions
-
When building a successful contract between two people, explain the problems that asymmetric information, agency relationships, and adverse selection can introduce.
-
Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
Della Simpson Inc. sells two popular brands of cookies, Dellas Delight and Bonnys Bourbon. Dellas Delight goes through the Mixing and Baking Departments and Bonnys Bourbon, a filled cookie, goes...
-
1. Two functions f and g can be combined by the arithmetic operations of ________, ________, ________, and _________ to create new functions. 2. The ________ of the function f with the function g is...
-
We have smashing systems for reporting, tracking, and controlling costs on design projects. Our planning of projects is better than any I have seen at other companies. Our scheduling seemed to serve...
-
What are the main components of capital budgeting? What are the three main types of cash flows?
-
The new owners of Bluegrass Natural Foods, Inc., have hired you to help them diagnose and cure problems that the company has had in maintaining adequate liquidity. As a first step, you perform a...
-
= Obara notices a kitten sitting on the ledge of a building, a height h 22 m off the ground. When the kitten loses its footing and begins to fall straight downward from rest, Obara sprints toward the...
-
The bond equivalent yield of a 91-day T-bill is 5%. What is the price of the bill for a $10,000 face value?
-
On 1/1/87, Cathy borrows $1,000 from ABS Finance Company and agrees to repay it in five annual installments at an effective annual rate of 11%. The first payment is due one year after the loan is...
-
What is the strategy behind using Internet marketing in an IMC campaign?
-
What is the strategy behind using sales promotion in an IMC campaign?
-
How do consumers use mobile?
-
What is the strategy behind using social media in an IMC campaign?
-
What is the strategy behind using alternative media in an IMC campaign?
-
Acme Company's production budget for August is 18,200 units and includes the following component unit costs: direct materials, $8.00; direct labor, $10.70; variable overhead, $6.70. Budgeted fixed...
-
An example of prescriptive analytics is when an action is recommended based on previously observed actions. For example, an analysis might help determine procedures to follow when new accounts are...
-
Historians disagree when the first email message caromed down the information superhighway, but there is no dispute that email was the Internet's first "killer app." Email quickly became the primary...
-
Orecchio and Oliver agreed to be equal partners in AA Capital. Orecchio assumed the titles of president and secretary for the new firm, while Oliver took the titles of chairman and treasurer. Because...
-
After answering her cell phone, Kayleigh Caudell cradled it between her right ear and shoulder as she continued to scroll through a large electronic file searching for a client document. "Hello,...
-
Think of few scenarios where temptation pattern is applicable and create the corresponding class diagram, use case and sequence diagram as shown in the solution and applicability sections for each of...
-
Illustrate with a class diagram the applicability of the temptation stable pattern in the following scenario: three or more companies are involved in sponsoring a sporting event. Each company would...
-
Adapt the temptation SAP to an e-commerce site that is similar to eBay. Illustrate with a class diagram how the ecommerce site can advertise user generated sales.
Study smarter with the SolutionInn App