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Natali [406]
3 years ago
12

Fred quits his job with a big accounting firm, where he was earning $95,000 per year, to start his own accounting business in a

building he owns. He previously rented the building to someone who paid him rent of $22,000 per year, but now Fred collects no rent because he is using the building himself. Fred pays himself a salary of $32,000 per year and has other expenses of $25,000 per year. The yearly economic cost for Fred's accounting business is _______
Business
1 answer:
nadezda [96]3 years ago
8 0

Answer:

The yearly economic cost for Fred's accounting business is $142,000.

Explanation:

Economic costs include both the explicit costs and the implicit costs.

Explicit costs are the expenditure on factors of production purchased from outsiders.

Implicit costs are the opportunity cost of owner provided resources.

Other expense is an explicit cost.

Foregone salary and foregone rent are the implicit costs.

So,

Economic cost = Foregone salary + Foregone rent + Other expenses

Economic cost = $95,000 + $22,000 + $25,000 = $142,000

Thus,

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3 years ago
2. A welder and a carpenter decided to get out of the construction industry and build farm trailers instead. From building a few
Firlakuza [10]

Answer:

Answer is explained in the explanation section below.

Explanation:

Data Given:

Material Cost Per Trailer = $500

Material Cost plus Profit Per Trailer (15%)  = $500 + 75 = $575

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Formula to Calculate the number of Trailers:

X = X1 (N^{S})

Where,

N = number of Trailers

S = Slope Parameter

X = $425

X1 = $700

So, First we need to find the slope parameter, in order to calculate the number of trailers to be built.

S = \frac{log \alpha }{log 2}

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Plugging in the values into the formula, we get:

S = \frac{log (0.85) }{log 2}

S = -0.234

Now, we can easily find the number of trailers.

X = X1 (N^{S})

Plugging in the values,

425 = 700 x (N^{-0.234})

Solving For N, we get:

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