1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Leni [432]
3 years ago
5

Andrew lives in New York City and runs a business that sells boats. In an average year, he receives $793,000 from selling boats.

Of this sales revenue, he must pay the manufacturer, a wholesale cost of $430,000; he also pays wages and utility bills totaling $301,000. He owns his showroom; if he chooses to rent it out, he will receive $15,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also if Andrew does not operate this boat business, he can work as a financial advisor, receive an annual salary of $50,000 with no additional monetary costs, and rent out his showroom a the $15,000 per year rate. No other costs are incurred in running this boat business.
Identify each of Andrew's costs in the following table as either an implicit cost or an explicit cost of selling boats.
Implicit Cost Explicit Cost
The wages and utility bills that Andrew pays
The rental income Andrew could receive if he choose to rent out his showroom
The salary Andrew could earn if he worked as a financial advisor
The wholesale cost for the boats that Andrew pays the manufacturer
Complete the following table by determining Andrew's accounting profit of his boat business.
Profit (Dollars)
Accounting Profit
Economic Profit
Business
1 answer:
melamori03 [73]3 years ago
7 0

Answer:

the solutions are below.

Explanation:

1. The wages and utility bills that Andrew pays is <u>explicit cost</u>

2. The rental income Andrew could receive if he choose to rent out his showroom  <u>is implicit cost</u>

3. The salary Andrew could earn if he worked as a financial advisor s an <u>implicit cost</u>

4. The wholesale cost for the boats that Andrew pays the manufacturer is an <u>explicit cost.</u>

<u></u>

<u>accounting profit = </u>revenue - explicit cost

= 793000-[430000+301000]

=$62000

<u>Economic profit = revenune - [explicit cost + implicit cost]</u>

<u>= </u>793000-[430000+301000+50000+15000]

= 793000-796000

= -$3000

<u></u>

<u></u>

<u></u>

<u></u>

<u></u>

You might be interested in
The_______of the strategic sourcing process, which is sometimes kicked off in response to an entirely new need within an organiz
VladimirAG [237]

The supply chain Management of the strategic sourcing process is sometimes kicked off in response to an entirely new need within an organization.

Explanation:

The main purpose of strategic sourcing is to save money, acquisition process, supplier performance, and minimizing risk.

Based on the seven steps the strategic source processing is performed. They are profile the category means that it defines the categories and commodities in it.

The second step is supply market analysis describes about the cost components of the products or service. Develop the strategy is the next step in which decides where to buy while minimizing risk and cost and how to develop sourcing strategy. The next step is selecting source process which is used as a request for proposal process.

Then negotiate and selection suppliers is used to conduct multiple rounds of negotiation to get a shortlist.

The sixth step is implement and integrate are used for implementation process. The final step is benchmark and track results is the key element for sourcing process.

5 0
3 years ago
Pick the TRUE statement: A. Investors (stockholders) and potential investors are mainly interested in a company's liquidity rati
Usimov [2.4K]

Answer:B

Explanation:

5 0
3 years ago
Earned $16,200 of cash revenue. Borrowed $12,000 cash from the bank. Adjusted the accounting records to recognize accrued intere
maksim [4K]

Answer:

A. The amount of interest expense to record for 2018 is $320, calculated as follows: $12,000 x 8% x 4/12 = $320.

B. No amount of cash was paid for interest in 2018; i.e. = $0.00

C. Effect of each transaction on balance sheet, income statement, and statement of cash flows:

1. Cash Revenue of $16,200

Balance Sheet - Cash and Retained Earnings are increased by $16,200.

Income Statement - Revenue is increased by $16,200.

Statement of Cash Flows: Cash inflows are increased by $16,200.  It is an operating activity (OA)

2. Bank Note Payable of $12,000 with accrued interest of $320 for 2018:

Balance Sheet - Cash and Notes Payable are increased with $12,000; Interest on Notes Payable is increased by $320 and Retained Earnings decreased by $320.

Income Statement: Net Income is decreased by $320.

Statement of Cash Flows: Cash inflows are increased by $12,000.  It is a financing activity (FA).

Explanation:

1. Cash revenue increases net income and Cash Account balance, and reflects positively on the cash flows for operating activities.

2. Notes Payable increases Cash Account balance (an asset) and Notes Payable (a liability).  It also increases the cash inflow for financing activities.

3. Accrued Interest on Notes Payable increases liability and decreases the net income, which reflects negatively on the Retained Earnings (Equity).  It does not affect the statement of cash flows as no disposal had been made yet.

4 0
3 years ago
1. All of the factors below create a change in demand for alcohol except: a. Change in cigarette prices given that cigarettes an
Gnesinka [82]

Answer:

d. Rise in price of alcohol

Explanation:

Change in Quantity demanded occurs due to change in Price. Change in Demand happens due to factors other than price - Income, Substitute & Complementary good's price, Taste.

Change in alcohol demand - due to substitute Cigarette price change , Change [Decrease] in alcohol demand - due to change in taste based on anti drinking sentiments, higher risk of alcohol liver cirrhosis , Change [Increase] in alcohol demand - due to change [rise] in Income : These all are due to factors other than price & hence are 'Change in Demand'

Rise in price of Alcohol leads to 'Change [Expansion] in Quantity Demanded' due to price change [rise] .

5 0
3 years ago
Anthony Herrera recently fulfilled his long-time dream of opening a gym that offers spinning exercise classes for $5.42 per pers
Alik [6]

Answer:

(a) $3.48 per unit

(b) 64.2%

Explanation:

(a) Anthony’s contribution margin per unit:

= Selling price per unit - Variable cost per unit

= $5.42 - $1.94

= $3.48 per unit

Therefore, the Anthony’s contribution margin per unit is $3.48 per unit.

(b) Anthony's contribution margin ratio:

= (Contribution Margin Per unit ÷ Selling Price per unit) × 100

= ($3.48 per unit ÷ $5.42 per unit) × 100

= 0.6420 × 100

= 64.20%

Therefore, the Anthony's contribution margin ratio is 64.2%.

8 0
3 years ago
Other questions:
  • Which of the following statements is FALSE? A) If we increase the fraction invested in the efficient portfolio beyond 100%, we a
    11·1 answer
  • During the course of your examination of the financial statements of the Hales Corporation for the year ended December 31, 2021,
    9·1 answer
  • Bonita Beauty Corporation manufactures cosmetic products that are sold through a network of sales agents. The agents are paid a
    12·1 answer
  • olga fjord sells computers. she earns a 4.5% commission on sales. how much must she sell in order to earn $9000
    5·1 answer
  • A project’s critical path is composed of activities A (variance .33), B (variance .67), C (variance .33), and D (variance .17).
    8·1 answer
  • Adding a new product line to an existing portfolio means that the line has​ __________________. A. increased product support ser
    8·1 answer
  • How a business can be affected by the law of supply
    12·1 answer
  • On which of the following levels are databases not used?
    6·1 answer
  • Building Big Box is a home improvement store based in Kansas and has been responsible for introducing some of the most innovativ
    10·1 answer
  • According to this video ,what should a good checking account offer for free
    15·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!