Winston and Julia are considering quitting their jobs and starting their own business. Their combined salaries are
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Question:
- Winston and Julia are considering quitting their jobs and starting their own business. Their combined salaries are $140,000 per year. They will cash out a $30,000 investment that earns 10% per year to help fund the business. They own a small office bldg. that they are renting out for $12,000 a year. They will end the rental contract and use the building for their business. They estimate variable costs (labor, supplies, energy, etc) will be $120,000 per year. They expect revenue of $250,000 per year.
- Calculate accounting costs and accounting profit of starting their own business.
- Calculate economic costs and economic profit of starting their own business.
- What should they do?
d. If they value being their own boss at $40,000 per year (“physic income”) would your answer to part c change?
Related Book For
Accounting Principles
ISBN: 9781119707110
14th Edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Jill E. Mitchell
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