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Problem

A woman started her own duplicating business and had $120,000 in revenue during the first year. Her explicit costs totaled $81,000 which included salaries of $45,000, supplies of $15,000, rent of $10,000 and utilities of $1,000. Her implicit cost was $25,000 which was her previous salary. Her business profit was $39,000 and economic profit was $14,000 with a normal return on investment of $25,000.

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Alfred Lopez
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982 views1 page

Problem

A woman started her own duplicating business and had $120,000 in revenue during the first year. Her explicit costs totaled $81,000 which included salaries of $45,000, supplies of $15,000, rent of $10,000 and utilities of $1,000. Her implicit cost was $25,000 which was her previous salary. Her business profit was $39,000 and economic profit was $14,000 with a normal return on investment of $25,000.

Uploaded by

Alfred Lopez
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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2.

  A woman managing a duplicating (photocopying) establishment for $25,000 Explicit cost = 45,000 +
per year decides to open her own duplicating place. Her revenue during the 15,000 +10,000 + 1,000 +
first year of operation is $120,000, and her expenses are as follows: Salaries
to hired help$45,000Supplies15,000Rent10,000Utilities1,000Interest on bank
10,000 = $81,000
loan 10,000 Implicit cost = $25,000
Business profit = 120,000 –
Calculate: the explicit costs, implicit costs and the business profit. the 81,000 = $39,000
economic profit, and  the normal return on investment in this business. Economic profit = 120,000
– (81,000 + 25,000) =
$14,000
Normal ROI = 39,000 –
14,000 = $25,000

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