Suppose Penny, the owner of Penny's Pie Factory, sells 1000 pies a month for $20 per pie. She pays $1600 in wages each month to each of her two part time employees. Butter, flour, sugar, eggs, fruits, chocolate, and other pie ingredients cost her $4000 per month. Her utilities and taxes average $600 per month. She owns the kitchen, the mixers, and the ovens that the Pie Factory uses, but she could rent them to someone else for $1000 per month if she wasn't using the kitchen and equipment for herself. A large bakery has offered her $90,000 per year ($7500/ month) if she will close her factory and come manage their pie department. 

1. What are Penny's monthly explicit costs?

 2. What are Penny's monthly implicit costs? 

3. Calculate Penny's monthly total revenue. 

4. Calculate Penny's accounting profit per month. 

5. Calculate Penny's economic profit per month. 

6. Suppose that Penny's next best alternative was to close the pie shop and go back to college to finish her chemical engineering degree, and chemical engineers have a starting salary of $80,000 per year with the potential to grow to $120,000 with 10 years of experience. How would this affect Penny's calculations? Suppose Penny, the owner of Penny's Pie Factory, sells 1000 pies a month for $20 per pie. She pays $1600 in wages each month to each of her two part time employees. Butter, flour, sugar, eggs, fruits, chocolate, and other pie ingredients cost her $4000 per month. Her utilities and taxes average $600 per month. She owns the kitchen, the mixers, and the ovens that the Pie Factory uses, but she could rent them to someone else for $1000 per month if she wasn't using the kitchen and equipment for herself. A large bakery has offered her $90,000 per year ($7500/ month) if she will close her factory and come manage their pie department.

 1. What are Penny's monthly explicit costs? 

2. What are Penny's monthly implicit costs? 

3. Calculate Penny's monthly total revenue. 

4. Calculate Penny's accounting profit per month. 

5. Calculate Penny's economic profit per month. 

6. Suppose that Penny's next best alternative was to close the pie shop and go back to college to finish her chemical engineering degree, and chemical engineers have a starting salary of $80,000 per year with the potential to grow to $120,000 with 10 years of experience.

 How would this affect Penny's calculations?

Answer rating: 100% (QA)

Question 1 1 Pennys monthly explicit costs are the costs that require a direct monetary payment Wages for two parttime employees 1600 Cost of ingredients 4000 Utilities and taxes 600 Total monthly exp... View the full answer