Check my work Jamie is considering leaving her current job, which pays $75,000 p
ID: 1134205 • Letter: C
Question
Check my work Jamie is considering leaving her current job, which pays $75,000 per year, to start a new company that develops applications for smartphones. Based on market research, she can sell about 50,000 units during the first year at a price of $4 per unit. With annual overhead costs and operating expenses amounting to $145,000, Jamie expects a profit margin of 20 percent. This margin is 5 percent larger than that of her largest competitor, Apps, Inc. a. If Jamie decides to embark on her new venture, what will her accounting costs be during the first year of operation? Her implicit costs? Her opportunity costs? Accounting costs: $ Implicit costs: $ Opportunity costs: eBook eferences K Prev 6 of Next > 743 SAMSUNGExplanation / Answer
Answer 6
a)
Accounting Cost is the total expenditure she did on overhead cost and on operating wxpense which equals 145000. Hence Accounting Cost = $145000
Implicit Cost is the salary she forgone because of leaving the job to start the business. This salary is worth 75000. Hence implicit cost = $75000
Opportunity Cost = accounting cost + implicit cost = 145000 + 75000 = 220000. Hence, Opportunity Cost = $220000
b)
In order to earn positive accounting profit her revenue should be greater than Accounting Cost. Hence, her revenue should be greater than $145000. Hence revenue needed to earn positive accounting profit is any revenue Greater than 145000.(revenue > $145000).
In order to earn positive economic profit her revenue should be greater than opportunity Cost. Hence, her revenue should be greater than $220000. Hence revenue needed to earn positive economic profit is any revenue Greater than 220000.(revenue > $220000)